News You Can Use

Current lower interest rates help future homeowners

University Relations
News Bureau (662) 325-3442
Contact: Dustin Barnes
Feb. 23, 2004

STARKVILLE, Miss.—With an unsteady economy and fluctuating interest rates, recent news accounts of lower mortgage rates has been welcome to some. But how much are lower rates—averaging slightly less than 5 percent over the past six months—really going to help?

“They probably aren’t as significant to a number of consumers right now,” says Bill Hardin, holder of the Warren Chair of Real Estate at Mississippi State University. “Basically, housing is continuing a several-year trend of affordability.”

For those who already own their homes but are seeking lower rates to refinance, current rates probably aren’t incentives.

“Since mortgage rates have been low for the last few years, most consumers already have refinanced and cannot gain much additional benefit from refinancing an existing loan,” Hardin observes.

But for first-time or new buyers, however, there’s a most compelling bottom line: now is a good time if you’re in the market for a home.

The flip side to this good news: those same rates are ready to creep back up. Based on historical trends, Hardin predicts rises within the next few months that may make home purchases significantly more expensive over the life of a mortgage.

Hardin cites budget and trade deficits as two factors that historically cause rates to climb. With the United States now facing both of those economic challenges, he anticipates a .5 percent increase in the rates within the next 12 months.

“But,” he cautions, “I think the real risk of higher rates is a long-term issue.”