Current Lending Rates

The Milwaukee Journal Sentinel reported today in the business section the following:

“Mortgage rates dropped for the second straight week, reflecting the impact the weakening economy is having on financial markets. Freddie Mac, the mortgage giant, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.14% this week, down from 6.20% last week. It marked a sharp decline since rates hit a high of 6.46% two weeks ago. Analysts attributed the decreases to expectations that the Federal Reserve will cut rates again.”

While I am all for lower rates and I am always happy to see them lower, the truth of the matter is, on $100,000 borrowed, the difference between 6.46% and 6.14% amounts to a difference of $5.22 a week. Can this really be classified as a “sharp decline”? Would this really be enough to make or break a deal in real estate? I should hope not. Besides, the true cost is even lower as this represents interest, and is tax deductible. This doesn’t even amount to much more than a value meal a the local fast food joint. The psychology of a lower rate has a greater perceived value than actual value. If you really found the perfect home the average buyer won’t walk away from a property because of a .5% difference in the interest rate on their loan. If you are playing your numbers that close you are buying something you can’t afford to begin with.