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Published: Mar 06, 2021 12 min read
Money; Getty Images

Mortgage rates took a breather from last week's upward trend as rates edged back down for most of the week. The rate for a 30-year loan, which had climbed over 3.5%, is now back under 3.4%. The decline took place over almost all types of loans with some minor exceptions.

Although rates are above record lows set early this year, they are still at historically low levels. For borrowers interested in a purchase loan or a refinance loan rates are still very favorable.

  • The latest average rate for a 30-year fixed-rate mortgage is 3.363%.
  • The latest average rate for a 15-year fixed-rate mortgage is 2.498%.
  • The latest average rate for a 5/1 jumbo ARM is 3.602%.
  • The latest average rate for a 7/1 conforming ARM is 4.478%.
  • The latest average rate for a 10/1 conforming ARM is 4.187%.

Current 30-year fixed mortgage rates

  • The 30-year rate is at 3.363%.
  • That's a one-day increase of 0.009 percentage points.
  • That's a one-month increase of 0.233 percentage points.

As the name indicates, the interest rate on a 30-year fixed-rate loan will not change over the life of the loan. The monthly payment will also remain unchanged throughout the term of the mortgage. Unless you pay the mortgage down faster with extra payments or by moving or refinancing, the loan will be paid off in 360 months.

When compared to a shorter-term loan like a 15-year, the interest rate on a 30-year loan will usually be higher. However, the monthly payment will be lower as you're spreading the balance over a longer period of time. Keep in mind though that because you're paying a higher rate for a longer time, the total interest paid will be higher on a 30-year loan than a 15-year loan.

Current 15-year fixed mortgage rate

  • The 15-year rate is at 2.498%.
  • That's a one-day increase of 0.007 percentage points.
  • That's a one-month increase of 0.161 percentage points.

Just like with a 30-year loan, a 15-year fixed-rate mortgage will have an interest rate that won't change over the term of the loan. The monthly payment also won't change. The loan will be paid off in 180 months unless you pay more than required each month or you refinance the mortgage.

The interest rate on a 15-year loan will typically be lower than that on a 30-year loan. The monthly payment, on the other hand, will be higher, as your paying the loan off in a shorter period of time. However, because you're paying a lower interest rate over fewer months, you will save on the total amount of interest paid.

As a result, 15-year loans can be attractive to buyers who can afford higher monthly payments and want to either pay the debt down faster or save on interest.

Current 5/1 jumbo adjustable-rate mortgage rates

  • The 5/1 ARM rate is at 3.602%.
  • That's a one-day increase of 0.589 percentage points.
  • That's a one-month increase of 0.756 percentage points.

Adjustable-rate mortgages will actually start with a stretch where the interest rate will be fixed. Once that period ends, the rate will reset, usually on a yearly basis. As a consequence, the monthly payment will be constant during the fixed-rate period and then can either increase or decrease according to changes in the interest rate.

The most common types of adjustable-rate mortgages is the 5/1, where the rate is fixed during the first five years and the changes yearly. Typical offerings also include the 7/1 and the 10/1.

A 5/1 ARM will usually have a lower interest rate than a 30-year mortgage during the initial five-year fixed-rate period. After that term, the rate could be lower or higher. ARMs are usually attractive to borrowers who don't plan on keeping the home beyond the fixed-rate period or don't believe rates will increase.

Current 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 3.237%.
  • The latest rate on a 30-year VA mortgage is 3.359%.
  • The latest rate on a 30-year jumbo mortgage is 3.557%.

Current 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 3.72%.
  • The latest refinance rate on a 15-year fixed-rate refinance is 2.793%.
  • The latest refinance rate on a 5/1 jumbo ARM is 3.733%.
  • The latest refinance rate on a 7/1 conforming ARM is 4.848%.
  • The latest refinance rate on a 10/1 conforming ARM is 4.764%.

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, into February and now March.

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, which means 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, March 4. 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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Rates are subject to change. All information provided here is accurate as of the publish date.