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A variety of notable mortgage rates went down today. The averages for both 30-year fixed and 15-year fixed mortgages slid down. For variable rates, the 5/1 adjustable-rate mortgage also tapered off.
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.
30-Year Fixed-Rate Mortgages
For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 2.87%, which is a decrease of 3 basis points from the previous week.
You can use NextAdvisor’s mortgage payment 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 how much 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 2.34%, which is a decrease of 4 basis points from the same time last week.
A 15-year, fixed-rate mortgage’s monthly payment is larger and will put more stress on your monthly budget than a 30-year mortgage would. However, 15-year loans have some considerable benefits: You’ll save thousands of dollars in interest and pay off your loan much faster.
5/1 Adjustable-Rate Mortgages
A 5/1 ARM has an average rate of 2.99%, a decrease of 4 basis points compared to a week ago.
An adjustable-rate mortgage is ideal for borrowers that will sell or refinance before the rate changes. If that’s not the case, their interest rates could end up being markedly 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, your payment could end up being hundreds of dollars higher after a rate adjustment, depending on the terms of your loan.
Where Rates Are Trending
To see where mortgage rates are going 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 from across the country:
|Loan term||Today’s Rate||Last week||Change|
|30-year mortgage rate||2.87%||2.90%||-0.03|
|15-year fixed rate||2.34%||2.38%||-0.04|
|30-year jumbo mortgage rate||2.89%||2.93%||-0.04|
|30-year mortgage refinance rate||2.90%||2.95%||-0.05|
Rates accurate as of January 4, 2021.
There isn’t a single factor that causes mortgage rates to move, but rather there are many. Chief among them are things like inflation and even the unemployment rate. When you see inflation increasing that usually means mortgage rates are about to climb higher. On the other hand, lower inflation typically accompanies lower mortgage rates. With higher inflation, the dollar becomes less valuable. This scenario pushes buyers away from mortgage-backed securities, which leads to price decreases and the need for increasing yields. And higher yields require borrowers to pay higher interest rates.
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.
What Does the Future Hold for Mortgage Rates?
In recent months, mortgage rates fell to new all-time lows. But what the future holds isn’t easy to predict. Where rates go is largely dependent on what happens with the economy. In addition, how well the coronavirus pandemic is contained will also play a role. When the economy recovers, rates will rise. But this could be largely dependent on the development of a coronavirus vaccine. However, if the economic recovery continues to be slow and the pandemic drags on, it’s likely we’ll see low rates for the foreseeable future.
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 led to an even greater shortage of homes. That’s caused a bidding war 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.