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While an important mortgage rate journeyed higher, today rates followed a split path. Interest rates on 30-year, fixed-rate mortgages made gains, while 15-year fixed mortgage rates were steady. At the same time, average rates for 5/1 adjustable-rate mortgages were reduced.
Interest rates for mortgages are dynamic. Yet they are now at levels lower than then almost any point since mortgage rates have been tracked. If you’re looking for a mortgage, now can be an excellent time to secure a fixed rate. Yet shopping around is still an important step in the process.
Check out mortgage rates that meet your distinct needs.
30-Year Fixed-Rate Mortgages
The median interest rate for a standard, 30-year, fixed mortgage is 2.92%, which is a growth of 1 basis point from seven days ago.
You can use NextAdvisor’s mortgage loan calculator to get an idea of what your monthly payments will be and understand how adding extra payments will impact your loan. The mortgage calculator can also show you the total interest you’ll owe over the life of the loan
15-Year Fixed-Rate Mortgages
The median rate for a 15-year, fixed mortgage is 2.39%, which is the same rate from seven days ago.
A 15-year, fixed-rate mortgage’s monthly payment is larger than what you would pay with a 30-year mortgage. However, 15-year loans have some considerable benefits: You’ll pay thousands less in interest and pay off your loan much faster.
5/1 Adjustable-Rate Mortgages
A 5/1 ARM has an average rate of 3.01%, a fall of 1 basis point from seven days ago.
An ARM is ideal for individuals that will sell or refinance before the rate changes. If that’s not the case, their interest rates could end up being a significant amount higher after a rate adjusts.
For the first five years, a 5/1 ARM will typically have a lower interest rate compared to a 30-year fixed mortgage. Keep in mind, depending on how much your loan’s rate adjusts your payment has the potential to increase by a large amount.
Where Rates Are Moving
To see where mortgage rates are moving we rely on information collected by Bankrate, which is owned by the same parent company as NextAdvisor. This table has current average rates based on information provide to Bankrate by lenders nationwide:
|30-year jumbo mortgage rate||2.91%||2.94%||-0.03|
|30-year mortgage refinance rate||2.95%||2.98%||-0.03|
Rates as of December 10, 2020.
When Should I Lock my Rate?
When you lock a rate it freezes the interest rate for a set amount of time. It’s not unheard of for lenders to offer rate locks for a fee, which could be included in the price of the loan. In general, the longer the interest rate lock period, the more expensive it will be. You may even run into a lender that will lock a rate for a shorter period of time because it wants to avoid the risk of a big jump in rates.
If mortgage rates rise, a rate lock will guarantee your original rate. When interest rates are declining you may be concerned about a rate lock; you don’t want to lock into a higher rate after all. One way to protect yourself in this scenario is to ask if your lender offers a floating rate lock. This allows you to get a lower rate if interest rates drop before you close your loan. Mortgage rates can be extremely unpredictable, so no one knows how they will change from day-to-day. That’s why it’s usually the right move to lock in a low rate, rather than betting on mortgage rates taking a tumble.
Don’t forget that during the pandemic, mortgage professionals have been extremely busy and it’s taking longer to close on a home. In some cases, it can take up to 60 days to close a mortgage loan — and there are also delays with mortgage refinancing.
Why Mortgage Rates Change
A number of factors can influence mortgage rates, including everything from inflation to unemployment. In general, inflation leads to higher interest rates and vice versa. The dollar loses value with increased inflation, and this causes mortgage-backed securities to become less enticing for investors, which leads to falling prices and higher yields. And if yields increase, interest rates become more expensive for borrowers.
The demand for housing can also impact mortgage rates. If more people are buying homes, there is a greater need for mortgages. This type of demand can drive interest rates up. And if there is less demand for mortgages, that can cause a decline in mortgage rates.
Where Are Mortgage Rates Going?
In recent months, mortgage rates fell to new all-time lows. But what the future holds isn’t easy to predict. The economy will play a big factor, and so will how well the coronavirus can be contained. A vaccine could help boost the economy and lead to an increase in mortgage rates. Conversely, mortgage rates are likely to stay low if the coronavirus continues to cause economic hardship.
Current Mortgage Rate Conditions
Mortgage rates haven’t been as stable as usual because of the COVID-19 pandemic and what it has done to the economy. But in general, rates have been depressed. In fact, mortgage rates set a record low, dipping under 3% for the first time. The problem for some people is you need excellent credit to qualify for these exceptionally-low rates. Not only that, but mortgage lenders are becoming more risk averse and requiring more sizable down payments while also closely scrutinizing borrowers’ employment.
Mortgage Rates’ Impact on Borrowers
When the real estate market is hot, extremely cheap mortgage rates can be good and bad in different ways for homebuyers. One good thing is that low-cost interest rates give borrowers the capacity to afford a home they might not have been able to in the past. For example, a 30-year, $350,000 loan with a 4% interest rate would have a monthly mortgage and interest payment of $1,670. A payment on the exact same loan would drop to $1,475 if the mortgage rate was reduced to 3%.
One drawback to slumping mortgage rates is that buyers may find increased competition for that dream home, which can drive home prices up.
Let’s take a look at how lower mortgage rates and rising prices can impact a homebuyer. A $350,000 home purchase with a 4% interest rate would have a monthly payment of $1,336 with a 30-year loan. At 20% down that’s a $70,000 down payment.
If the price jumps to $380,000 with a reduced rate of 3% the numbers change a bit. A monthly mortgage and interest payment on a 30-year loan climbs to $1,451. But, your down payment would cost you $6,000 more if you wanted to keep the same 20% down.
Is Now a Good Time to Buy a Home?
Whether or not you buy a home is a highly personal choice. Your financial situation will play a big role in your decision. Before you buy a home, you’ll want to have a secure source of income, enough saved for closing costs, and a high credit score.
However, the pandemic has exacerbated a shortage of homes, leading to bidding wars and rising prices. Those trends mean it can be a frustrating market for buyers.
How We Got These Rates
The rates we have included are averages provided by Bankrate.com Site Averages and are calculated after the close of the previous business day. The lenders that the “Bankrate.com Site Average” tables include are not the same every day.
National lenders provide this mortgage rate information to Bankrate.com. It is possible the mortgage rates we reference has changed since this was published.