Just wanted to give Tip Hero readers a heads up that mortgage rates have been dropping recently and are near all-time lows. The average rate on a 30-year fixed mortgage was 4.68 percent last week, just a hair above the all-time low of 4.61 percent according to a recent Bloomberg article. This is sparking a mini refinancing boom according to the same article. To give you an idea how today’s rates stack up here’s an interesting chart of the 30-year mortgage rate going back to ’71.

You can see from the chart that the 30-year mortgage rate got as high as 17% in the early eighties, a rate more than 3.5 times today’s level. It’s hard to say how low rates will go, and how long they will stay at these levels but many prominent investors including Warren Buffett are worried about inflation and believe rates could rise significantly in the future.

If you have a decent credit rating, a mortgage rate of around 5.5% or above, and plan to stay in your home for a while you may want to look into refinancing your mortgage to lock into historically low rates and save quite a bit of money.

One final thing I would like to reemphasize to potential homebuyers is that the total cost of purchasing a home is comprised not just of the price of the home but also the interest rate your mortgage is financed at. Home prices could drop but if interest rates are rising, the total cost of homeownership can actually go up. I ran some quick numbers through an online mortgage calculator. A $200,000 mortgage at 4.5% would yield a monthly payment of $1,013. If the price of the home dropped 10% and the mortgage rate rose 1.5% so you were financing a $180,000 mortgage at 6% your monthly payment would be $1,079 a month or $66 more a month. Now there are lots of variables to factor in when purchasing a home but very high on that list should be the impact of interest rates.

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