What Are Today’s Mortgage Rates
Mortgage rates have already hit historic lows. In fact, the U.S. weekly average mortgage rates were 2.99% for a 30-year fixed-rate loan 2.54% for a 15-year fixed-rate loan and 2.91% for a five-year adjustable-rate mortgage as of August 20, according to Freddie Mac.
These rates come on the tail end of a long downward mortgage rate trend, with rates at the same time last year at 3.55% for a 30-year fixed-rate loan 3.03% for a 15-year fixed-rate loan and 3.32% for a 5/1 ARM. Mortgage interest rates have repeatedly broken new records as they continued to plunge this year in response to the economic fallout of COVID-19. To see what kind of rates you currently qualify, plug your information into Credible’s free online tools.
And while Fannie Mae predicted in mid-July that mortgage rates would fall below 3.0% by the end of the year, that milestone has already been reached as average rates broke the 3% barrier in early August. Yet, even as rates have tumbled, real estate values have largely remained stable, creating an unprecedented refinancing opportunity as well as a chance for well-qualified buyers to save substantially on their home loans.
Len Kiefer Deputy Chief Economist With Freddie Mac
Kiefer anticipates the currently low mortgage rates to continue throughout next year. Our forecast is that rates will be relatively flat next year, he says. But Kiefer says rates may not necessarily stay that way. They might bounce around a little bit, he says. And he believes rates may be modestly higher at the end of next year, but pretty flat over the next 12 months.
Kiefer believes any change we see in mortgage rates will be tied to the broader economy. The key thing for the early part of 2021 is going to be what happens with the pandemic, Kiefer says. If the economy opens up, we may see interest rates start to rise a little bit. However, if theres increased economic uncertainty, that would put downward pressure on rates. One thing to keep an eye on is inflation. If inflation increases, he expects rates to rise in that scenario.
Why Did Mortgage Rates Jump Upand Will They Go Back Down
One of the biggest culprits behind the rise of mortgage rates is inflation.
Inflation, which hit 7% last monthits fastest rise since 1982isnt just making the cost of groceries, cars, furniture, and just about everything else go up. Typically, rates move in tandem with inflation, says Ratiu.
Thats because lenders saddled with higher rents, energy bills, and labor costs are going to pass that on to customers.
If inflation continues to grow at the current pace, rates will move up even faster in the following months, says Nadia Evangelou, a senior economist and the director of forecasting at the National Association of Realtors®. However, the Federal Reserve is taking steps to curb inflation, which could keep rates at least somewhat in check.
The other reasons rates are up are more complicated.
Lenders need money to make new loans. So to free up capital, theyll often bundle up the loans theyve made together and sell these mortgage-backed securitiesaka mortgage bondson the secondary market to investors. Theyre viewed as safer investments that wont generate the big profits investors can reap in the stock market.
When the economy is shaky, investors often move money out of the riskier stock market and into bonds, driving up prices. Since mortgage rates generally move in the opposite direction of bond prices, when investors sell bonds, rates rise, says Ratiu.
Yes, its a big jump, says Ratiu. But rates have been hovering near historic lows for over a year.
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The Buy Now Pay Later Boom Could Affect Mortgage Applications
Buy Now, Pay Later schemes have become hugely popular, but there are concerns over how lenders factor BNPL debts into mortgage calculations.
Our recent investigation found that only four of the biggest 10 lenders ask specifically about BNPL commitments when you apply for a mortgage agreement in principle. This means debts may not come to light until much later in the application process.
With BNPL showing no signs of disappearing, lenders and borrowers alike could face issues in 2022. The onus will be on banks to come up with a clear and consistent method of capturing BNPL agreements alongside other credit such as credit cards and loans early in the application process.
Very Low Mortgage Rates
Fixed rates are currently near record lows but they are rising. As mortgage rates rise, they reduce homebuying budgets.
The impact of early rate increases on homebuying budgets will be greater than the subsequent rate increases. Prospective homebuyers can take advantage of this effect by getting a pre-approved mortgage 4 months before making a purchase. By the time they find a place they like, rates may have risen, and competing bidders who didnt get a pre-approved committed rate might be saddled with smaller homebuying budgets. If your bank doesnt offer a 4-month rate guarantee with their pre-approval, then talk to a mortgage broker.
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Should I Lock In My Mortgage Rate Today
Locking in a rate as soon as you have an accepted offer on a house can help guarantee a competitive rate and affordable monthly payments on your home mortgage. A rate lock means that your lender will guarantee you an agreed upon rate for typically 45 to 60 days, regardless of what happens with average rates. Locking in a competitive rate can protect the borrower from rising interest rates before closing on the mortgage
It may be tempting to wait to see if interest rates will drop lower before getting a mortgage rate lock, but this may not be necessary. Ask your lender about float-down options, which allow you to snag a lower rate if the market changes during your lock period. These usually cost a few hundred dollars.
As Inflation Heats Up Home Sales Expected To Decline Over Next 2 Years
Inflation is heating up and could accelerate further, but the impact on mortgage rates is likely to be modest thanks to the Federal Reserve laying out a clear roadmap of its plans to withdraw its support for mortgage markets in the months ahead.
Thats according to the latest economic and housing forecast from economists at mortgage giant Fannie Mae, who nevertheless see home sales declining over the next two years and mortgage refinancings plummeting as interest rates rise.
Its the first time Fannie Mae has provided a forecast all the way out to 2023, when they expect the economy to have entered the mature state of the business cycle, with the risk of another recession moving into focus.
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What The February Rate Forecast Means For Homeowners And Refinancing
Refinance rates may be up from where they were at the end of 2021, but theyre still not far off from historic lows seen in the last two years. That still means many people who have high pre-pandemic rates and havent already locked in a lower one are in a good spot to refinance.
The average rates you see arent what every borrower will get from every lender. They vary significantly, Kapfidze says. The average rate doesnt tell you much about your particular situation.
If youre interested in refinancing, Kapfidze recommends talking with multiple lenders to get quotes specific to your situation. Dont rely on average rates when deciding to refinance or determining if it might be a good idea. Your balance, credit profile, and current interest rate will all play a role.
Refinancing is still a good idea if your current rate is relatively high and you havent already done so, Wolf says.
If youre looking to refinance and your current mortgage rate is 4.5%-plus, you can still save a lot of money every month by going through the refinancing process, she says. For those refinancing, theres still time.
The rising rates might make refinancing less appealing for people looking to save on their monthly payments. But they might still be appealing if youre looking for a cash-out refinance to tap into higher equity because of rising home prices, Vitner says.
Which Mortgage Loan Is Best
The best mortgage for you depends on your financial situation and your goals.
For instance, if you want to buy a high-priced home and you have great credit, a jumbo loan is your best bet. Jumbo mortgages allow loan amounts above conforming loan limits which max out at $548,250 in most parts of the U.S.
On the other hand, if youre a veteran or service member, a VA loan is almost always the right choice.
VA loans are backed by the U.S. Department of Veterans Affairs. They provide ultra-low rates and never charge private mortgage insurance . But you need an eligible service history to qualify.
Conforming loans and FHA loans are great low-down-payment options.
Conforming loans allow as little as 3% down with FICO scores starting at 620.
FHA loans are even more lenient about credit home buyers can often qualify with a score of 580 or higher, and a less-than-perfect credit history might not disqualify you.
Finally, consider a USDA loan if you want to buy or refinance real estate in a rural area. USDA loans have below-market rates similar to VA and reduced mortgage insurance costs. The catch? You need to live in a rural area and have moderate or low income to be USDA-eligible.
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Mortgage Interest Rates Forecast For Rest Of 2020
Mortgage rates are currently at or near record lows, but they could fall further. Check out this mortgage interest rates forecast to learn more.
With coronavirus sending the U.S. into a recession and causing record-high unemployment, the Fed set benchmark interest rates near zero to bolster the economy leading to a mortgage rates drop. Now homeowners and potential buyers want to know: What’s the mortgage interest rates forecast? Will rates drop further and is it worth waiting to score an even better deal?
The mortgage rate trend has been a boon for homeowners and would-be buyers. Current homeowners can potentially benefit by refinancing and may save substantially on their home loans. Anyone considering the purchase of a home could also potentially secure a more affordable loan than ever before. While those homeowners interested in further savings may wish to consider mortgage rate forecasts in making their decisions, many others will find that today’s rates are so low it’s not worth the risk of waiting only to see rates rise.
To decide what’s best for you, it can be helpful to explore your mortgage options available based on today’s rates. You can visit Credible to easily compare mortgages by rates and loan terms without affecting your credit.
Will Mortgage Rates Keep Dropping
The short answer is, likely not.
In fact, mortgage rates had already ticked back up slightly by the time Freddie Macs data was released.
Keep in mind that Freddie Mac collects mortgage interest rate data on Monday and Tuesday of each week. But the data is released on Wednesday or Thursday. That means mortgage rate trends can change for better or worse by the time Freddies numbers come out.
In this case, mortgage rates were on the rise midweek.
Our own data showed an average 30year conventional mortgage rate of 3.149% * on Wednesday, November 10 the same day Freddie Mac was citing 2.98% rates for that loan type.
For a more indepth analysis of whats moving current mortgage rates, check out our daily mortgage interest rate update.
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Todays Mortgage Rates And Your Monthly Payment
The rate on your mortgage can make a big difference in how much home you can afford and the size of your monthly payments.
If you bought a $250,000 home and made a 20% down payment $50,000 you would end up with a starting loan balance of $200,000. On a $200,000 home loan with a fixed rate for 30 years:
- At 3% interest rate = $843 in monthly payments
- At 4% interest rate = $955 in monthly payments
- At 6% interest rate = $1,199 in monthly payments
- At 8% interest rate = $1,468 in monthly payments
You can experiment with a mortgage calculator to find out how much a lower rate or other changes could impact what you pay. A home affordability calculator can also give you an estimate of the maximum loan amount you may qualify for based on your income, debt-to-income ratio, mortgage interest rate and other variables.
Other factors that determine how much you’ll pay each month include:
Choosing a 15-year mortgage instead of a 30-year mortgage will increase monthly mortgage payments but reduce the amount of interest paid throughout the life of the loan.
Fixed vs. ARM:
The mortgage rates on adjustable-rate mortgages reset regularly and monthly payments change with it. With a fixed-rate loan payments remain the same throughout the life of the loan.
Taxes, HOA Fees, Insurance:
Homeowners insurance premiums, property taxes and homeowners association fees are often bundled into your monthly mortgage payment. Check with your real estate agent to get an estimate of these costs.
Tips For Getting The Lowest Mortgage Rate Possible
There is no universal mortgage rate that all borrowers receive. Qualifying for the lowest mortgage rates takes a little bit of work and will depend on both personal financial factors and market conditions.
Check your credit score and credit report. Errors or other red flags may be dragging your credit score down. Borrowers with the highest credit scores are the ones who will get the best rates, so checking your credit report before you start the house-hunting process is key. Taking steps to fix errors will help you raise your score. If you have high credit card balances, paying them down can also provide a quick boost.
Save up money for a sizeable down payment. This will lower your loan-to-value ratio, which means how much of the homes price the lender has to finance. A lower LTV usually translates to a lower mortgage rate. Lenders also like to see money that has been saved in an account for at least 60 days. It tells the lender you have the money to finance the home purchase.
Shop around for the best rate. Dont settle for the first interest rate that a lender offers you. Check with at least three different lenders to see who offers the lowest interest. Also consider different types of lenders, such as credit unions and online lenders in addition to traditional banks.
Finally, lock in your rate. Locking your rate once youve found the right rate, loan product and lender will help guarantee your mortgage rate wont increase before you close on the loan.
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Why Is My Mortgage Rate Higher Than Average
Not all applicants will receive the very best rates when taking out a new mortgage or refinancing. Credit scores, loan term, interest rate types , down payment size, home location and the loan size will all affect mortgage rates offered to individual home shoppers.
Rates also vary between mortgage lenders. It’s estimated that about half of all buyers only look at one lender, primarily because they tend to trust referrals from their real estate agent. Yet this means that they may miss out on a lower rate elsewhere.
Freddie Mac estimates that buyers who got offers from five different lenders averaged 0.17 percentage points lower on their interest rate than those who didn’t get multiple quotes. If you want to find the best rate and term for your loan, it makes sense to shop around first.
Know When To Refinance Your Home
You may want to refinance your home, when you can lower your interest rate, reduce monthly payments or pay off your mortgage sooner. You may want to use a cash-out finance to access your homes equity or take out a new loan to eliminate private mortgage insurance .
Refinancing your mortgage can make sense if you plan to remain in your home for a number of years. There is, after all, a cost to refinancing that will take some time to recoup. Youll need to know the loans closing costs to calculate the break-even point where your savings from a lower interest rate exceed your closing costs. You can calculate this by dividing your closing costs by the monthly savings from your new payment.
Our mortgage refinance calculator could help you determine if refinancing is right for you.
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When you see rates advertised that have a funky percentage, something like 4.86%, thats the APR, which factors in some of the costs of obtaining the loan.
Same goes for quintessential promo rates like 4.99% or 5.99%, which again factor in costs and are presented that way to entice you.
Those popular surveys also use average rates, which dont tend to fall on the nearest eighth of a percentage point. Again, these are averages, and not what youd actually receive.
Your actual mortgage rate will be a whole number, like 5% or 6%, or fractional, with some number of eighths involved. Thats just how mortgage interest rates operate.
However, there are some lenders that may offer a promotional rate such as 4.99% instead of 5% because it sounds a lot betterdoesnt it?
Either way, when using loan calculators be sure to input the correct rate to ensure accuracy.