Rates Are Borrower-Friendly, But Will That Spur Sales?

Falling mortgage rates have set off a refinancing frenzy, but there's no evidence yet that these cheap loans have had any effect on the stagnant homesales market.

In the past, though, low rates have supported busy markets and high rates have suppressed sales. For instance, rates hovered around 6 percent during the boom a few years back. But in 1981, when rates averaged 16.63 percent — for a time, they topped 18 percent — sales volume was at one of the lowest points in decades.

Consider this: In October 1981, when rates were 18.45 percent, the monthly principal-and-interest payment on a $200,000 30-year loan would have been $3,088. This week, with rates at 4.96 percent, it would be $1,069.


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