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Today, a number of principal mortgage rates dropped off. Both 30-year fixed and 15-year fixed mortgage rates trended lower. We also saw an upward trend in the average rate of 5/1 adjustable-rate mortgages.
Interest rates for mortgages change constantly. However, by historical standards they’re quite low. If you’re looking for a mortgage, now it may be a good time to get a guaranteed low rate for the life of the loan. But you’ll want to be sure to find the best rate before committing.
30-Year Fixed-Rate Mortgages
The median interest rate for a standard 30-year fixed mortgage is 2.96%, which is a decrease of 10 basis points from last week.
You can use NextAdvisor’s home loan calculator to get an idea of what your monthly payments will be and play around with extra mortgage payments to wrap your head around how much you could save. The mortgage calculator can also show you all of the 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 2.48%, which is a decrease of 14 basis points from the same time last week.
A 15-year, fixed-rate mortgage’s monthly payment will be much bigger. So finding room in your budget for a 30-year loan’s monthly payment would be more simple. However, 15-year loans have some considerable benefits: You’ll save thousands of dollars in interest and pay off your loan much sooner.
5/1 Adjustable-Rate Mortgages
A 5/1 adjustable-rate mortgage has an average rate of 3.04%, an uptick of 1 basis point compared to last week.
An ARM is ideal for households who 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 rate could climb higher and your payment might grow by hundreds of dollars a month.
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 nationwide:
|Loan term||Today’s Rate||Last week||Change|
|30-year mortgage rate||2.96%||3.06%||-0.10|
|15-year fixed rate||2.48%||2.62%||-0.14|
|30-year jumbo mortgage rate||2.96%||3.01%||-0.05|
|30-year mortgage refinance rate||3.06%||3.07%||-0.01|
Rates accurate as of November 16, 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 pricey 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, the rate lock kicks in to protect you. You may even come across what is known as a floating-rate lock. This enables you to take advantage of lower rates if they drop before closing. If interest rates are declining, a floating-rate lock could be a great option to consider. 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.
Don’t forget 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 there are also delays with mortgage refinancing.
Why Mortgage Rates Change
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.
Where Are Mortgage Rates Going?
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.
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
When the real estate market is hot, extremely cheap mortgage rates can be good and bad in different ways for homebuyers. One good thing is that low-cost interest rates give borrowers the capacity to afford a home they might not have been able to in the past. 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%.
One drawback to slumping mortgage rates is that buyers may find increased competition for that dream home, which can drive home prices up.
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?
There’s no “right time” to buy a house — the decision is a highly personal one. Keep in mind, when you purchase a home the monthly payment won’t be your only cost. You’ll also need enough money saved up for upfront closing costs and a down payment. And you’ll get a better deal if you have a higher credit score and lower debt-to-income ratio.
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.