Mortgage rates trended higher throughout the past week, indicating that the days of ultra-low interest rates may be over for the time being. On Thursday, Freddie Mac released its benchmark primary mortgage survey which showed the 30-year fixed-rate mortgage increasing to the highest rate since last summer.
While the news of increasing rates may be concerning to some borrowers who were planning on buying a home or refinancing their mortgage this year, it shouldn't be. Rates are still very low historically speaking and well-qualified buyers will still be able to find low rates for the foreseeable future.
- The average rate on a 30-year fixed-rate mortgage is 3.491% today.
- The average rate on a 15-year fixed-rate mortgage is 2.588% today.
- The average rate on a 5/1 jumbo ARM is 2.962% today.
- The average rate on a 7/1 conforming ARM is 4.273% today.
- The average rate on a 10/1 conforming ARM is 4.436% today.
Today's 30-year fixed mortgage rates
- Today's 30-year rate is 3.491%.
- That's a one-day increase of 0.077 percentage points.
- That's a one-month increase of 0.438 percentage points.
Fixed-rate loans will have an interest rate that will remain consistent throughout the full term of the loan. The monthly payment will also remain constant. With a 30-year loan, you'll have fixed interest and payments for 360 months — or until you refinance or sell.
The interest rate on a 30-year loan is higher than on a shorter-term loan like a 15-year mortgage. Because you're paying the loan off over a longer period of time your monthly payment will be lower, however, you will pay more in overall interest than with a shorter-term loan. Because the monthly payments on 30-year loans are lower than with a 15-year mortgage, it is the most common type of loan.
Today's 15-year fixed mortgage rate
- Today's 15-year rate is 2.588%.
- That's a one-day increase of 0.041 percentage points.
- That's a one-month increase of 0.205percentage points.
As with a 30-year loan, the interest rate on a 15-year loan will remain unchanged throughout the full term of the loan. As a result, the monthly payment will also remain unchanged.
The interest rate on a 15-year loan is currently lower than that of a 30-year loan. However, because you're paying the loan off in half the time, your monthly payment will be higher than on the longer-term mortgage. Because you're paying over a shorter period of time, you will also pay less in overall interest over the life of the loan than with a 30-year.
Today's 5/1 jumbo adjustable-rate mortgage rates
- Today's 5/1 ARM rate is 2.962%.
- That's a one-day decrease of 0.027 percentage points.
- That's a one-month increase of 0.169 percentage points.
Adjustable-rate loans have an initial period where the interest will remain unchanged. After that initial period ends, the rate will reset according to market conditions. Your monthly payments will be constant during the fixed-rate period but then fluctuate along with any changes in the interest rate.
With a 5/1 ARM, your interest rate will remain fixed for the first five year period and then reset annually. Other common ARM terms are the 7/1 and the 10/1.
The initial interest on five-years adjustable-rate mortgages is often lower than that of fixed-rate mortgages making these loans particularly attractive for buyers who aren't planning on staying in the home beyond the fixed-rate period. However, during the height of the pandemic interest rates on fixed-rate mortgages hit rock bottom, at times coming in lower than ARM rates and allowing borrowers to lock in super low rates on fixed rates loans.
Today's VA, FHA, and jumbo loan rates
The average rates for FHA, VA and jumbo loans are:
- The latest rate on a 30-year FHA mortgage is 3.582%.
- The latest rate on a 30-year VA mortgage is 3.573%.
- The latest rate on a 30-year jumbo mortgage is 3.56%.
Today's mortgage refinance rates
The average rates for 30-year loans, 15- year loans and 5/1 jumbo ARMs are:
- The latest refinance rate on a 30-year fixed-rate refinance is 2.938%.
- The latest refinance rate on a 15-year fixed-rate refinance is 3.896%.
- The latest refinance rate on a 5/1 jumbo ARM is 3.286%.
- The latest refinance rate on a 7/1 conforming ARM is 5.207%.
- The latest refinance rate on a 10/1 conforming ARM is 5.071%.
Where are mortgage rates heading this year?
Mortgage rates sunk through 2020. Millions of homeowners responded to low mortgage rates by refinancing existing loans and taking out new ones. Many people bought homes they may not have been able to afford if rates were higher.
In January 2021, rates briefly dropped to the lowest levels on record, but trended higher through the month and into February.
Looking ahead, experts believe interest rates will rise more in 2021, but modestly. Factors that could influence rates include how quickly the COVID-19 vaccines are distributed and when lawmakers can agree on another economic relief package. More vaccinations and stimulus from the government could lead to improved economic conditions, which would boost rates.
While mortgage rates are likely to rise this year, experts say the increase won’t happen overnight and it won’t be a dramatic jump. Rates should stay near historically low levels through the first half of the year, rising slightly later in the year. Even with rising rates, it will still be a favorable time to finance a new home or refinance.
Factors that influence mortgage rates include:
- The Federal Reserve. The Fed took swift action when the pandemic hit the United States in March of 2020. The Fed announced plans to keep money moving through the economy by dropping the short-term Federal Fund interest rate to between 0% and 0.25%, which is as low as they go. The central bank also pledged to buy mortgage-backed securities and treasuries, propping up the housing finance market. The Fed has reaffirmed its commitment to these policies for the foreseeable future multiple times, most recently at a late January policy meeting.
- The 10-year Treasury note. Mortgage rates move in lockstep with the yields on the government’s 10-year Treasury note. Yields dropped below 1% for the first time in March, and have been slowly rising since then. Currently, yields have been hovering above 1% since the beginning of the year, pushing interest rates slightly higher. On average, there is typically a 1.8 point “spread” between Treasury yields and benchmark mortgage rates.
- The broader economy. Unemployment rates and change in gross domestic product are important indicators of the overall health of the economy. When employment and GDP growth are low, it means the economy is weak, which can push interest rates down. Thanks to the pandemic, unemployment levels reached all-time highs early last year and have not yet recovered. GDP also took a hit, and while it has bounced back somewhat, there is still a lot of room for improvement.
Tips for getting the lowest mortgage rate possible
There is no universal mortgage rate that all borrowers receive. Qualifying for the lowest mortgage rates takes a little bit of work and will depend on both personal financial factors and market conditions.
Check your credit score and credit report. Errors or other red flags that may be dragging your credit score down. Borrowers with the highest credit scores are the ones who will get the best rates, so checking your credit report before you start the house-hunting process is key. Taking steps to fix errors will help you raise your score. If you have high credit card balances, paying them down can also provide a quick boost.
Save up money for a sizeable down payment. This will lower your loan-to-value ratio, or how much of the home’s price the lender has to finance. A lower LTV usually translates to a lower mortgage rate. Lenders also like to see money that has been saved in an account for at least 60 days. It tells the lender you have the money to finance the home purchase.
Shop around for the best rate. Don’t settle for the first interest rate that a lender offers you. Check with at least three different lenders to see who offers the lowest interest. Also consider different types of lenders, such as credit unions and online lenders in addition to traditional banks.
Also take time to find out about different loan types. While the 30-year fixed-rate mortgage is the most common type of mortgage, consider a shorter-term loan like a 15-year loan or an adjustable-rate mortgage. These types of loans often come with a lower rate than a conventional 30-year mortgage. Compare the costs of all to see which one best fits your needs and financial situation. Government loans — such as those backed by the Federal Housing Authority, the Department of Veterans Affairs and the Department of Agriculture — can be more affordable options for those who qualify.
Finally, lock in your rate. Locking your rate once you’ve found the right rate, loan product, and lender will help guarantee your mortgage rate won’t increase before you close on the loan.
Our mortgage rate methodology
Money’s daily mortgage rates show the average rate offered by over 8,000 lenders across the United States the previous business day. Today, we are showing rates for Thursday, February 25. Our rates reflect what a typical borrower with a 700 credit score might expect to pay for a home loan right now. These rates were offered to people putting 20% down and include discount points.
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