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Today, a handful of principal mortgage rates slid downward. Both 30-year fixed and 15-year fixed mortgage rates declined. We also saw a contraction in the average rate of 5/1 adjustable-rate mortgages.
Mortgage interest rates are dynamic. However, they’ve been quite low by historical standards. 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. 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 2.96%, which is a decline of 6 basis points from last week.
You can use NextAdvisor’s mortgage calculator to get an idea of what your monthly payments will be and calculate what you’ll save with additional payments. 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 2.47%, which is a decrease of 3 basis points from seven days ago.
A 15-year, fixed-rate mortgage’s monthly payment is larger than what you would pay with a 30-year mortgage. However, 15-year loans have some considerable benefits: You’ll pay thousands less in interest and pay off your loan much faster.
5/1 Adjustable-Rate Mortgages
A 5/1 adjustable-rate mortgage has an average rate of 3.03%, a decrease of 1 basis point compared to a week ago.
An adjustable-rate mortgage is ideal for individuals that will refinance or sell before the rate changes. If that’s not the case, their interest rates could end up being remarkably 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 moving 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:
|30-year jumbo mortgage rate||2.94%||3.07%||-0.13|
|30-year mortgage refinance rate||3.05%||3.18%||-0.13|
Rates as of November 18, 2020.
Is a Rate Lock Important?
When you lock a rate it freezes the interest rate for a set amount of time. It’s not unheard of for lenders to offer rate locks for a fee, which could be included in the price of the 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.
What Influences Mortgage Rates?
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.
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. Conversely, mortgage rates are likely to stay low if the coronavirus continues to cause economic hardship.
Current Mortgage Rate Conditions
Mortgage rates were a bit unstable thanks to the pandemic and shutdown, but overall they have been remarkably low. 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%.
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.
Suppose the price of the same property jumps to $380,000, while the mortgage rate drops to 3%. If you can still manage a down payment of 20% the monthly payment on a 30-year loan would be $1,451, an increase of only $115 a month. But the down payment goes up by another $6,000, and some of your closing costs are also likely to rise.
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.