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Multiple closely watched mortgage rates sunk lower today. The average rates on 30-year fixed and 15-year fixed mortgages both dropped. The average rate on 5/1 adjustable-rate mortgages, or ARMs, the most popular type of variable rate mortgage, increased.
Rates for mortgages are constantly changing, but they remain low by historical standards. If you’re in the market for a mortgage, it could be a great time to lock in a rate. Just make sure you’ve looked around for the best rate first.
Find the right mortgage rate for your specific criteria.
30-year fixed mortgages
The average 30-year fixed-mortgage rate is 3.32 percent, a decrease of 8 basis points over the last week. Last month on the 23rd, the average rate on a 30-year fixed mortgage was higher, at 3.58 percent.
At the current average rate, you’ll pay principal and interest of $439.06 for every $100,000 you borrow. That’s $4.42 lower, compared with last week.
You can use Bankrate’s home loan calculator to get a handle on what your monthly payments would be and see the effect of adding extra payments. It will also help you computehow much interest you’ll pay over the life of the loan.
15-year fixed mortgages
The average 15-year fixed-mortgage rate is 2.82 percent, down 4 basis points since the same time last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $682 per $100,000 borrowed. That’s clearly much higher than the monthly payment would be on a 30-year mortgage at that rate, 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 adjustable rate mortgageis 3.17 percent, ticking up 3 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 considerably higher when the loan first adjusts, and thereafter.
Monthly payments on a 5/1 ARM at 3.17 percent would cost about $431 for each $100,000 borrowed over the initial five years, but could ratchet higher 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 across the nation 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 June 23, 2020.
When to lock your mortgage rate
A rate lock guarantees your interest rate for a specified period of time. Lenders often offer 30-day rate locks for a nominal fee or roll the price of the lock into your loan. Some lenders will lock rates for longer periods, even exceeding 60 days, but those locks can be costly. In today’s volatile market, some lenders will lock an interest rate for only two weeks to avoid unnecessary risk.
The benefit of a rate lock is that if interest rates rise, you’re locked into the guaranteed rate. Some lenders have a floating-rate lock option, which allows you to get a lower rate if interest rates fall before you close your loan. In a falling rate environment, a float-down lock could be worth the cost. 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.
Why do mortgage rates move up and down?
Mortgage rates are influenced by a range of economic factors, from inflation to unemployment numbers. Typically, higher inflation means higher interest rates and vice versa. As inflation rises, the dollar loses value, which in turn drives off investors for mortgage-backed securities, causing the prices to fall and yields to climb. When yields climb, rates get more expensive for borrowers.
A strong economy usually means more people buying homes, which drives demand for mortgages. This increased demand can push rates higher. The opposite is also true; less demand can trigger a drop in 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 average rates.”
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June 23, 2020 at 06:30PM
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Current Mortgage Rates, June 23, 2020 | Rates ease - Bankrate.com
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