The Federal Reserve announced today that they will keep interest rates low until at least late 2014 in an effort to help jump-start the sluggish economy by making it less expensive to borrow money across all segments of the economy.What this means for homebuyers and current homeowners is that mortgage rates for a purchase loan or to refinance will remain remarkably low in the near-term, keeping affordability high. The 30-year fixed mortgage rate fell below 4 percent on Zillow Mortgage Marketplace in mid-October 2011 and has dropped as low as 3.67 percent in recent weeks.
Here's a quick comparison of mortgage rates and affordability using today's rates compared to 2008:
Today's rates: For a homebuyer shopping for a home today assuming 20 percent down and today's interest rate of 3.7 percent, they would be able to afford a $215,000 home with a monthly mortgage payment of about $1,000 per month (including principal and interest).
2008 rates: If a homebuyer shopped for a home in 2008 when mortgage rates averaged roughly 6 percent, the same homebuyer would only be able to afford a $165,000 home for $1,000 per month (including principal and interest)
Difference: $50,000
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