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Mortgage Rates Drop to 3-Year Low

Mortgage interest rates continue to fall

Mortgage interest rates, which last peaked at nearly five percent in November 2018, have been falling for the past nine months.

This week, mortgage interest rates fell to a low not seen since 2016, giving prospective homebuyers some additional buying power.

With the lowest borrowing costs in three years and more homes to choose from in many Oahu neighborhoods, market conditions are very favorable for buyers.

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The magic of lower interest rates

Interest rates have a direct effect on monthly borrowing costs, and with Hawaii's high home prices, even a small change in rates can affect how much money you are approved to borrow for your home loan.

interest ratesFor example, at an interest rate of 3.5 percent, the monthly payment on a $500,000 home (with a 20 percent down payment), would be $1,800. That's less than the average monthly rent!

Even with only a 10 percent down payment, at a rate of 3.5 percent, the monthly payment on that $500,000 home would be $2,020. However, should rates return to where they were in 2018 - at around 4.5 percent - the monthly payment on that same home with 20 percent down would be $2,030. 

In other words, that one percent difference means you could put down $50,000 with a 3.5 percent rate or $100,000 with a 4.5 percent rate and have the same monthly payment. 

That's the magic of low interest rates!

Will rates continue to fall?

No one knows for sure how long rates will stay low; however, many economists believe that rates will remain low throughout the end of the year and likely drop again.

However, trying to "time" the market by waiting for rates to fall even further could backfire. As interest rates fall, home prices - which have been mostly flat - are likely to tick up again. You'll also have more competition from other homebuyers, who will also be lured out by lower rates.

So, if you are ready to become a homeowner (or to trade up), now is a good time to make your move, while interest rates are historically low, prices have moderated and inventory is more robust than it's been in years. 

Find out how much you can afford

The first step to finding out how much you can afford is to meet with a loan officer and get pre-qualified for a home loan. If you don't know how to find a loan officer, your Locations REALTOR® can recommend one. You can also use our mortgage calculator to estimate your monthly payments.