When the economy is in the tank, the federal government often lowers interest rates to make money cheaper. So, the economy and debt rates are positively correlated. This is great news to anyone who is planning to acquire mortgage debt. In early 2008, mortgage interest rates (30 yr. fixed) hovered around 6.5%. Now that the economy has declined, the rate is right around 5%! This can add up to big savings on your monthly mortgage payment.
For example, if you took out a 30 year mortgage for $100,000 compounded monthly at 6.5%, your payment (before taxes, insurance, and PMI) would be $632. With a 5.0% interest rate, your payment would be $537. A savings of $95 a month! The savings are even higher when borrowing larger sums of money. Under the same conditions as above, but assuming your new mortgage is $250,000, your monthly payment at 6.5% would be $1,580. At 5.0% it decreases to $1,342, a savings of $238 a month.
I have posted a mortgage rate chart on the left side of my blog homepage to help us keep up with mortgage rates. One of my favorite movies is "Black Sheep" with Chris Farley and David Spade. I point that out because this post makes me seem like a total anal math nerd, and I would rather come across as a fun, go-with-the-flow type.
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