Tuesday, August 11, 2015

Chicago Mortgage Interest Rates: Improving Because of China, Again

Believe it or not, Chicago area home buyers are getting help from an unlikely partner – the Chinese government.  In an effort to support the economy, the government there has devalued its currency to create growth, make their exports cheaper and keep inflation from weakening too much.  This news has negatively impacted the U.S. stock market which then positively impacts interest rates (meaning rates are dropping).  As of 9am C.S.T., Fannie Mae mortgage backed securities were up 36 basis points, which translates to almost a .125% improvement in 30 year fixed rates.

This news highlights an important fact that even if the U.S. government increases interest rates in the near future, long term interest rates for loans such as the 30 year fixed, may be held down by other international news as investors choose to put their money in safer investments, such as Fannie Mae mortgage backed securities. 

However, if you are considering a new home purchase, it is important to understand that every 1% increase in interest rates lowers your borrowing power by about 10%.  This means the payment for a $300,000 loan at 4% will be approximately the same as the payment on a $270,000 loan at 5%.  This can have a huge impact on the price of home that you can afford. 

If you have any questions about mortgage loans for the purchase of a new home or the refinance of an existing home, please contact one of our mortgage loan experts today at (708) 531-8388.

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