The recent rumor that the Treasury Department is considering a plan to revitalize the U.S. home market by pushing down interest rates for loans to purchase a home has sparked many conversations and article over the last 48 hours. The plan, which is in the development stage, would temporarily use the clout of mortgage giants Fannie Mae and Freddie Mac to encourage banks to lend at rates as low as 4.5%, more than a full point lower than prevailing rates for standard 30-year fixed-rate mortgages. The current rumor only involves homes that are purchased but not homes that are refinanced. Which begs the question, would this help senior housing? The answer is most likely, yes.
If you take the median priced home in the U.S. of approximately 183,000 and put twenty percent down at a rate of 5.5%, your monthly payment is $832. If you lower that rate to 4.5%, the payment is lowered to $743. Are cost savings of $89 per month going to spur thousands of homeowners to purchase a new home (the figures above don’t even consider closing costs). The more realistic way this program would help is establish a floor for housing prices and enable more seniors to sell their homes and move on to their next residence, wherever/whatever that might be.