There’s no doubt the coronavirus discussion is the hot topic of conversation across the world. Even in our office, it comes up multiple times a day and the oil feud is adding fuel to the fire. It’s causing fear and the stock market to swing wildly, but there’s potentially a silver lining: these might help your construction business.
10-Second Summary
- Coronavirus fears and the Russia/OPEC oil feud have triggered a drop in the Fed rate in response to market drops
- Mortgage rates are falling to the lowest many of us have ever seen
- Lower mortgage rates can be a catalyst for pulling the trigger on a new home or remodel
We’ll leave the debates about how worried we should be to health care professionals, economists, and the mainstream media. For now, we’re more interested in the Fed rate.
If you’re unfamiliar with the Fed rate, it’s the interest rate banks charge each other to borrow Federal Reserve funds overnight. It has wide-reaching effects, though. When the Fed rate drops, other loan rates do as well. The most important for our purposes are mortgage rates.
With the Fed rate dropping to 1.00% to 1.25%, mortgage rates are sitting at the lowest we may see for a long time, if ever again. A quick glance shows 30-year mortgage rates sitting at 3.660% and a 15-year loan at just 2.980%!
Let’s put it in perspective. Say you’re buying a home and borrowing $350,000. The difference between 4.75% and 3.66% loans is more than $200 per month. Over the life of the loan, you save some $80,000 if you don’t make any early payments or refinance.
Whether your niche is remodeling or new construction, that’s some valuable math to have in your hands as you work to close the deal with new clients. The news and banks are helping as they spread the word of these rates, too.
So when someone calls you up or comes to visit your sales office, make sure you understand the basics of the Fed rate and where we are with current mortgage rates. The current world conditions may be scary, but for those clients that are in a place to remodel or buy, the effects on the rates might just be what gets them to put their signature on your contract.
