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Multiple closely watched mortgage rates decreased today. The average rates on 30-year fixed and 15-year fixed mortgages both receded. Meanwhile, the average rate on 5/1 adjustable-rate mortgages also dropped.
Rates for mortgages change daily, but overall, they are very low by historical standards. If you’re in the market for a mortgage, it may make sense to go ahead and lock if you see a rate you like. Just make sure you shop around first.
Find the right mortgage rate for your specific criteria.
30-year fixed mortgages
The average rate for the benchmark 30-year fixed mortgage is 3.27 percent, a decrease of 10 basis points since the same time last week. This time a month ago, the average rate on a 30-year fixed mortgage was higher, at 3.45 percent.
At the current average rate, you’ll pay principal and interest of $436.30 for every $100,000 you borrow. That’s lower by $5.52 than 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 see the effect of 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 2.79 percent, down 6 basis points over the last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $681 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 save thousands of dollars 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 3.12 percent, ticking down 3 basis points from a week ago.
These types of loans are best for people who expect to refinance or sell 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 3.12 percent would cost about $428 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 rate trends page.
Want to see where rates are currently? Lenders nationwide respond to our 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 accurate as of July 1, 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, sometimes for more than 60 days, but those locks can be costly. In today’s volatile market, some lenders will lock an interest rate for only two weeks because they don’t want to take on 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.
Keep in mind that 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.
Factors that influence mortgage rates
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.
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
The current mortgage rate environment has been unstable because of the coronavirus pandemic, but generally 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 “Bankrate’s Rate Averages Methodology.”
Shopping for a mortgage lender? Check out Bankrate’s mortgage lender reviews.
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July 01, 2020 at 05:46PM
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