karamysh/Shutterstock

karamysh/Shutterstock

Several closely watched mortgage rates declined today. The average rates on 30-year fixed and 15-year fixed mortgages both tapered off. The average rate on 5/1 adjustable-rate mortgages, or ARMs, the most popular type of variable rate mortgage, increased.

Mortgage rates change daily, but overall, they are very low by historical standards. If you’re in the market for a mortgage, it could make sense to lock if you see a rate you like. Just don’t do so without shopping around first.

See mortgage rates for a variety of loan types.

30-year fixed mortgages

The average rate for the benchmark 30-year fixed mortgage is 3.17 percent, down 7 basis points over the last week. Last month on the 14th, the average rate on a 30-year fixed mortgage was higher, at 3.40 percent.

At the current average rate, you’ll pay a combined $430.83 per month in principal and interest for every $100,000 you borrow. That represents a decline of $3.83 over what it would have been last week.

You can use Bankrate’s mortgage loan calculator to get a handle on what your monthly payments would be and find out how much you’ll save by adding extra payments. It will also help you calculate how much interest you’ll pay over the life of the loan.

15-year fixed mortgages

The average 15-year fixed-mortgage rate is 2.74 percent, down 1 basis point over the last seven days.

Monthly payments on a 15-year fixed mortgage at that rate will cost around $678 per $100,000 borrowed. Yes, that payment is much bigger than it would be on a 30-year mortgage, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much faster.

5/1 ARMs

The average rate on a 5/1 ARM is 3.22 percent, up 11 basis points since the same time last week.

These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be materially higher when the loan first adjusts, and thereafter.

Monthly payments on a 5/1 ARM at 3.22 percent would cost about $434 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.

Where rates are headed

To see where Bankrate’s panel of experts expect rates to go from here, check out our mortgage rate projections.

Want to see where rates are at this moment? Lenders nationwide respond to Bankrate.com’s weekday mortgage rates survey to bring you the most current rates available. Here you can see the latest marketplace average rates for a wide variety of purchase loans:

Rates as of July 14, 2020.

Should you lock a mortgage rate?

A rate lock guarantees your interest rate for a specified period of time. It’s common for lenders to offer 30-day rate locks for a fee or to include the price of the rate lock into your loan. Some lenders will lock rates for longer periods, even exceeding 60 days, but those locks can be expensive. In today’s volatile market, some lenders will lock an interest rate for only two weeks to avoid unnecessary risk.

With a rate lock, if interest rates rise, you’re locked into the guaranteed rate. You may be able to find a lender that offers a floating rate lock. A floating rate lock lets you get a lower rate if interest rates decline before closing your loan. It could be worth the cost in a declining rate environment. Because there is no guarantee of where mortgage rates will head in the future, it may be smart to lock in a low rate instead of holding out on rates for potentially decline further.

It’s important to keep in mind: During the pandemic, all aspects of real estate and mortgage closings are taking much longer than usual. Expect the closing on a new mortgage to take at least 60 days, with refinancing taking at least a month.

What causes mortgage rates to change

A number of economic factors influence mortgage rates. Among them are inflation and unemployment. Higher inflation typically leads to higher mortgage rates. The opposite is also true; when inflation is low, mortgage rates typically are as well. As inflation increases, the dollar loses value. That drives investors away from mortgage-backed securities (MBS), which causes the prices to decrease and yields to increase. When yields move higher, rates become more expensive for borrowers.

Generally speaking, when the economy is strong, more people buy homes. That drives demand for mortgages. Increased demand for mortgages can cause rates to increase. The opposite is also true; less demand can lead to lower rates.

Current mortgage rate environment

Mortgage rates have been volatile because of the COVID-19 pandemic. Generally, though, rates have been low. Mortgage rates are rising and falling from week to week, as lenders are inundated with forbearance and refinance requests. In general, however, rates are consistently below 4 percent and even dipping into the mid to low 3s. This is an especially good time for people with good to excellent credit to lock in a low rate for a purchase loan. However, lenders are also raising credit standards for borrowers and demanding higher down payments as they try to dampen their risks.

Methodology: The rates you see above are Bankrate.com Site Averages. These calculations are run after the close of the previous business day and include rates and/or yields we have collected that day for a specific banking product. Bankrate.com site averages tend to be volatile — they help consumers see the movement of rates day to day. The institutions included in the “Bankrate.com Site Average” tables will be different from one day to the next, depending on which institutions’ rates we gather on a particular day for presentation on the site.

To learn more about the different rate averages Bankrate publishes, see “Understanding Bankrate’s on-site rate averages.”

Searching for the right mortgage lender? See reviews of top lenders.



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