Mortgage Rates Are Trending Higher: May 15 and 16, 2021
Mortgage rates trended higher this week, with the average rate for a 30-year fixed-rate loan starting at a low of 3.234% on Monday and ending the week at 3.408%, nearly two-tenths of a percentage point higher.
Even with the current upward swing, rates remain very low historically speaking. Well-qualified buyers looking to take advantage of the spring buying season would be able to lock in a low rate on a purchase loan. Homeowners can also lock in a lower rate by refinancing their home loan.
- The latest rate on a 30-year fixed-rate mortgage is 3.408%.
- The latest rate on a 15-year fixed-rate mortgage is 2.505%.
- The latest rate on a 5/1 jumbo ARM is 3.783%.
- The latest rate on a 7/1 conforming ARM is 4.784%.
- The latest rate on a 10/1 conforming ARM is 4.736%.
Today's 30-year fixed mortgage rates
- The 30-year rate is 3.408%.
- That's a one-day increase of 0.027 percentage points.
- That's a one-month increase of 0.033 percentage points.
A 30-year fixed-rate mortgage will have an interest rate and monthly payments that remain unchanged for as long as you have the loan. You'll pay it off in 360 months unless you pay extra, refinance or sell.
The interest rate on a 30-year loan will be higher if you compare it to a shorter loan like a 15-year. On the other hand, because the payback time is longer, the monthly payments will be lower. However, because you're paying a higher rate over a longer time, you will pay more in total interest with a 30-year.
The lower monthly payments and longer payback time make a 30-year loan the go-to option for most home loan borrowers.
15-year fixed mortgage rates today
- The 15-year rate is 2.505%.
- That's a one-day increase of 0.005 percentage points.
- That's a one-month decrease of 0.028 percentage points.
Another option is a 15-year fixed-rate mortgage. Both the interest rate and monthly payments won't change for however long you have the loan, and you'll pay it off in 180 months unless you pay extra, refinance or sell your home.
The interest rate on a 15-year loan will be lower compared to the rate on a 30-year loan, but because the payback time is cut in half, your monthly payments will be higher. You will save on interest however since you'll be paying a lower rate for less time, making a 15-year loan a good option if you can make the higher payments.
5/1 jumbo adjustable-rate mortgage rates today
- The 5/1 ARM rate is 3.783%.
- That's a one-day decrease of 0.016 percentage points.
- That's a one-month increase of 0.892 percentage points.
If you don't plan on staying in the home long-term, you could consider an adjustable-rate loan. The interest rate on an ARM will be fixed for a specific number of years before it becomes variable. While the rate is fixed, your monthly payments won't change.
For example, a 5/1 ARM will have a fixed interest rate during the first five years of the loan. After that, the rate will change once a year according to market conditions. You'll pay the loan off in 360 months unless you pay extra, refinance or sell. Other common ARM terms include a 7/1 and a 10/1.
The initial interest rate on a 5/1 ARM will be among the lowest on the market, making it a good option for a short-term loan. However, if you keep the loan beyond the fixed-rate period, remember that the interest rate and monthly payments can increase.
Current VA, FHA and jumbo loan rates
The average rates for FHA, VA and jumbo loans are:
- The rate on a 30-year FHA mortgage is 3.175%.
- The rate on a 30-year VA mortgage is 3.229%.
- The rate on a 30-year jumbo mortgage is 3.702%.
Current mortgage refinance rates
The average rates for 30-year loans, 15- year loans and 5/1 jumbo ARMs are:
- The refinance rate on a 30-year fixed-rate refinance is 3.809%.
- The refinance rate on a 15-year fixed-rate refinance is 2.694%.
- The refinance rate on a 5/1 jumbo ARM is 4.318%.
- The refinance rate on a 7/1 conforming ARM is 4.89%.
- The refinance rate on a 10/1 conforming ARM is 5.224%.
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 2020 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 most recent business day rates are available for. Today, we are showing rates for Thursday, May 13, 2021. 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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