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A few key mortgage rates moved downward today. The averages for both 30-year fixed and 15-year fixed mortgages slid down. The most common type of variable-rate mortgage is the 5/1 adjustable-rate mortgage, cruised higher.
Mortgage interest rates are in a constant state of transition. 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 might be an excellent time to secure a fixed rate. Just keep in mind you still need to compare offers from different lenders.
30-Year Fixed-Rate Mortgages
The median interest rate for a standard 30-year fixed mortgage is 3.02%, which is a decline of 5 basis points from seven days ago.
You can use NextAdvisor’s home loan 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 2.50%, which is a decrease of 13 basis points compared to a week ago.
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 earlier.
5/1 Adjustable-Rate Mortgages
A 5/1 adjustable-rate mortgage has an average rate of 3.04%, a rise of 1 basis point from seven days ago.
An ARM is ideal for households who will refinance or sell 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 Moving
To see where mortgage rates are headed 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 nation:
|30-year jumbo mortgage rate||3.07%||2.98%||+0.09|
|30-year mortgage refinance rate||3.16%||3.06%||+0.10|
Rates as of November 12, 2020.
What to Know About a Rate Lock
When you lock a rate it freezes the interest rate for a set amount of time. If your lender offers a rate lock, be sure to ask about fees. There may be a fee to lock your rate, but it’s typically not very large or it can be added into the cost of your loan. In general, the longer the interest rate lock period, the more costly it will be. You may even run into a lender that will lock a rate for a shorter period of time because it wants to avoid the risk of a big jump in rates.
If mortgage rates rise, a rate lock will guarantee your original rate. When interest rates are declining you may be concerned about a rate lock; you don’t want to lock into a higher rate after all. One way to protect yourself in this scenario is to ask if your lender offers a floating rate lock. This allows you to get a lower rate if interest rates drop before you close your loan. Mortgage rates can be extremely unpredictable, so no one knows how they will change from day-to-day. That’s why it’s usually the right move to lock in a low rate, rather than betting on mortgage rates taking a tumble.
One thing to consider is that during the pandemic, mortgage professionals have been extremely busy and it’s taking longer to close on a home. In some cases, it can take up to 60 days to close a mortgage loan — and you should also expect a refinance to take longer than normal.
What Influences Mortgage Rates?
A number of factors can influence mortgage rates, including everything from inflation to unemployment. In general, inflation leads to higher interest rates and vice versa. The dollar loses value with increased inflation, and this causes mortgage-backed securities to become less enticing for investors, which leads to falling prices and higher yields. And if yields increase, interest rates become more expensive for borrowers.
A strong economy has historically increased demand for homes. When more homes are sold, the demand for mortgages also increases, which can cause rates to go up. But the flip side is also true: A drop in demand for mortgages could signal a coming downturn in mortgage rates.
Where Are Mortgage Rates Going?
In recent months, we’ve seen mortgage interest rates linger near all-time lows. But it’s difficult to determine where they will go from here. 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.
Current Mortgage Rate Bearings
Mortgage rates haven’t been as stable as usual because of the COVID-19 pandemic and what it has done to the economy. But in general, rates have been depressed. In fact, mortgage rates set a record low, dipping under 3% for the first time. The problem for some people is you need excellent credit to qualify for these exceptionally-low rates. Not only that, but mortgage lenders are becoming more risk averse and requiring more sizable down payments while also closely scrutinizing borrowers’ employment.
Mortgage Rates’ Impact on Borrowers
The rock-bottom mortgage rates we’ve seen have distinct advantages and disadvantages for homebuyers. For starters, buyers have the ability to borrow larger amounts now than when rates were higher. For example, a 30-year, $350,000 loan with a 4% interest rate would have a monthly mortgage and interest payment of $1,670. A payment on the exact same loan would drop to $1,475 if the mortgage rate was reduced to 3%.
What we’ve seen happen in today’s market is a rise in home prices, which has been driven, at least in part, by the extraordinarily low mortgage rates.
Let’s say you were going to purchase a home for $350,000 with a 4% mortgage rate. A 20% down payment would cost you $70,000, and with a 30-year loan term the monthly payment would be $1,336.
If the price jumps to $380,000 with a reduced rate of 3% the numbers change a bit. A monthly mortgage and interest payment on a 30-year loan climbs to $1,451. But, your down payment would cost you $6,000 more if you wanted to keep the same 20% down.
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 exacerbated a shortage of homes, leading to bidding wars 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.