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By Leslie Cook
February 4, 2021
Money; Getty Images

Mortgage rates are slightly higher today compared to last week. Rates increased across the board, with VA loans seeing the biggest jump. Despite the upward trend, rates are very low historically and it’s still a good time to buy a home or refinance a mortgage.

  • Today’s rate on a 30-year fixed-rate mortgage is 3.105%
  • Today’s rate on a 15-year fixed-rate mortgage is 2.326%
  • Today’s rate on a 5/1 jumbo ARM is 2.826%

Current 30-year fixed mortgage rates

  • Today’s average is 3.105%, up 0.76 percentage points from last week.

Conventional 30-year fixed-rate mortgages are the most common type of mortgage sought by borrowers, accounting for 75% of all new mortgages. With this kind of mortgage, you’ll pay a fixed monthly amount throughout the length of the loan (or until you sell or refinance). Your interest rate will also be the same for the full term of the loan.

Compared to a 15-year fixed rate mortgage, you will be charged a higher interest rate on a 30-year mortgage, but your monthly payments will be lower, as you’re spreading the debt over a longer period of time. However, you will pay more in interest over the life of the loan.

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Current 15-year fixed mortgage rates

  • Today’s average is 2.326%, up 0.47 percentage points from last week.

A 15-year mortgage will have a lower interest rate than a 30-year mortgage, as you’ll be paying the loan back in half the time. Like with other fixed-rate mortgages, your interest rate and monthly payment amounts won’t change over the life of the loan.

You’ll ultimately pay less in interest with a 15-year mortgage when compared to a 30-year mortgage, making it an attractive option for borrowers who can afford the monthly payments. Your mortgage payments will be higher than with a 30-year loan.

Current 5/1 jumbo adjustable-rate mortgage rates

  • Today’s average is 2.826%, up 0.033 percentage points from last week

An adjustable-rate mortgage used to offer the lowest initial interest rate. However, today, due to the impact of the COVID-19 pandemic, the 30-year fixed-rate mortgage often offers a lower interest rate.

Adjustable-rate mortgages feature an initial fixed period, during which the interest rate on your loan and your monthly payments will stay the same. After that initial period, the interest rate will either increase or decrease according to market conditions.

With a 5/1 ARM, your interest rate will be fixed for the first five years of the loan, then reset every year after that. As a result, your mortgage payments will be the same during the first five years of the loan, but may change every year afterward.

VA, FHA, and jumbo loan rates today

The average rates for FHA, VA and jumbo loans are:

  • Today’s rate on a 30-year FHA mortgage is 2.961%.
  • Today’s rate on a 30-year VA mortgage is 3.007%.
  • Today’s rate on a 30-year jumbo mortgage is 3.577%.

Current mortgage refinance rates

The average rates for 30-year loans, 15- year loans and 5/1 jumbo ARMs are:

  • Today’s rate on a 30-year fixed-rate refinance is 3.474%.
  • Today’s rate on a 15-year fixed rate refinance is 2.581%.
  • Today’s rate on a 5/1 jumbo ARM is 3.136%.

Where are mortgage rates heading?

The past year has been an eventful one for the mortgage industry. The economic stress caused by the COVID-19 pandemic led to interest rates setting 16 new all-time lows in 2020 before reaching the current record low of 2.65% on January 7, 2021. (This is according to Freddie Mac, which tracks weekly rates for the most qualified borrowers.)

As a result, millions of homeowners have taken advantage of the low rates to refinance their existing mortgages and save on their monthly payments. Lower interest rates also made it easier for many buyers to afford larger, more spacious homes away from urban centers.

Looking ahead, there are a number of factors that many experts believe will lead interest rates to slightly higher levels by the end of 2021. These factors include the distribution of the COVID-19 vaccine and increased economic stimulus from the new administration, which will all lead to improved economic conditions.

While mortgage rates are likely to rise, experts say the increase won’t happen overnight and it won’t be a dramatic jump. Rates should stay at 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 good time to finance a new home.

Factors that influence mortgage rates include:

  • The Federal Reserve. When the pandemic first hit the United States in March of 2020, the Federal Reserve took immediate action to maintain liquidity in the markets by dropping the short-term Federal Fund interest rate to near zero and pledging to buy mortgage-backed securities and treasuries. The Fed has reaffirmed its commitment to these policies for the foreseeable future.
  • 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 levels and gross domestic product are important indicators of the overall health of the economy. When unemployment and GDP 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

Qualifying for the lowest mortgage rates takes a little bit of work. 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.

Check for errors or other red flags that may be dragging your credit score down. Taking steps to fix those 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. 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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