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Mortgage rates followed a split path today. The average interest rate for a 30-year fixed mortgage held steady, however 15-year fixed-rate mortgages saw average rates go down. We also saw a shrinking in the average rate of 5/1 adjustable-rate mortgages.
Mortgage interest rates change constantly. Yet rates are an incredible deal compared to almost any other time in history. If you’re looking for a mortgage, now can be an excellent time to secure a fixed rate. But you’ll want to be sure to find the best rate before committing.
30-Year Fixed-Rate Mortgages
The average 30-year fixed mortgage interest rate is 3.06%, which is unchanged from last week.
You can use NextAdvisor’s mortgage payment 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 the total 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 2.62%, which is a decrease of 1 basis point from seven days ago.
A 15-year, fixed-rate mortgage’s monthly payment is, without a doubt, a much bigger monthly payment than what you’d get with a 30-year mortgage offering the same interest rate. 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 ARM has an average rate of 3.03%, a decrease of 1 basis point compared to a week ago.
An ARM is ideal for individuals who will sell or refinance before the rate changes. If that’s not the case, their interest rates could end up being noticeably 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:
|Loan type||Interest rate||A week ago||Change|
|30-year fixed rate||3.06%||3.06%||N/C|
|15-year fixed rate||2.62%||2.63%||-0.01|
|30-year jumbo mortgage rate||3.01%||3.04%||-0.03|
|30-year mortgage refinance rate||3.07%||3.12%||-0.05|
Updated on November 9, 2020.
What to Know About a Rate Lock
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. 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.
Why do Mortgage Rates Fluctuate?
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. The economy will play a big factor, and so will how well the coronavirus can be contained. 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%.
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 take a look at how lower mortgage rates and rising prices can impact a homebuyer. A $350,000 home purchase with a 4% interest rate would have a monthly payment of $1,336 with a 30-year loan. At 20% down that’s a $70,000 down payment.
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?
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.