What does a 0.25% rate decrease mean in terms of dollars? That for every $1,000,000 a buyer borrows it will equate to a savings of around $2,500 annually ($208/month) in terms of payment.
From a macro point of view, as interest rates decrease, then we are likely to see more investment into the U.S. economy as money becomes cheaper to borrow, such as mortgages to purchase homes. Buyers can stretch their budget as the same monthly payment can support a higher purchase price, or for the same purchase price, Buyers can save money each month due to interest savings.
On the flip side, as interest rates decrease, savers may experience a drop in interest payments as savings, money market, and bank CD rates decline. This may be a good time to purchase rental properties to provide a more steady income stream in the future, even if rates continue to decline. Furthermore, in strong rental markets like Los Angeles, landlords can count on strong tenant demand in years to come to continue to fill vacancies as they arise.
In our office, we refer to the Morningstar Andex Chart, the Historical Interest Rate chart from Freddie Mac and MLS data to educate our agents and clients.
“Starting early and investing consistently over long periods of time history suggests that markets can be resilient—especially for those with the patience to stay invested.”
[Data source: Freddie Mac]