Mortgage rates showed no clear direction today, but one key rate rose. The average for a 30-year fixed-rate mortgage moved up, but the average rate on a 15-year fixed decreased. On the variable-mortgage side, the average rate on 5/1 adjustable-rate mortgages slid lower.
Mortgage rates are in a constant state of flux, but overall, they are very low by historical standards. If you’re in the market for a mortgage, it could be a great time to lock in a rate. Just be sure to shop around.
See mortgage rates for a variety of loan types.
30-year fixed mortgages
The average rate for a 30-year fixed mortgage is 3.12 percent, an increase of 10 basis points since the same time last week. Last month on the 28th, the average rate on a 30-year fixed mortgage was lower, at 3.09 percent.
At the current average rate, you’ll pay $428.10 per month in principal and interest for every $100,000 you borrow. That’s up $5.42 from what it would have been last week.
You can use Bankrate’s mortgage calculator to get a handle on what your monthly payments would be and see the effect of adding extra payments. It will also help you computehow much interest you’ll pay over the life of the loan.
15-year fixed mortgages
The average 15-year fixed-mortgage rate is 2.60 percent, down 3 basis points over the last seven days.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $672 per $100,000 borrowed. That may squeeze your monthly budget than a 30-year mortgage would, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more rapidly.
The average rate on a 5/1 ARM is 3.36 percent, ticking down 1 basis point over the last week.
These types of loans are best for people who expect to refinance or sell before the first or second adjustment. Rates could be materially higher when the loan first adjusts, and thereafter.
Monthly payments on a 5/1 ARM at 3.36 percent would cost about $441 for each $100,000 borrowed over the initial five years, but could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.
Where rates are headed
To see where Bankrate’s panel of experts expect rates to go from here, check out our Mortgage rate predictions for this week.
Want to see where rates are at this moment? Lenders across the nation respond to Bankrate’s weekday mortgage rates survey to bring you the most current rates available. Here you can see the latest marketplace average rates for a wide variety of purchase loans:
Rates accurate as of August 28, 2020.
When to lock your mortgage rate
A rate lock guarantees your interest rate for a specified period of time. It’s common for lenders to offer 30-day rate locks for a fee or to include the price of the rate lock into your loan. Some lenders will lock rates for longer periods, sometimes for more than 60 days, but those locks can be pricey. In today’s volatile market, some lenders will lock an interest rate for only two weeks because they don’t want to take on unnecessary risk.
With a rate lock, if interest rates rise, you’re locked into the guaranteed rate. Some lenders have a floating-rate lock option, which allows you to get a lower rate if interest rates fall before you close your loan. In a falling rate environment, a float-down lock could be worth the cost. Because mortgage rates are not predictable, there’s no guarantee that rates will stay where they are from week to week or even day to day. So, if you can lock in a low rate, then you should do so rather than gamble on interest rates falling even lower.
Keep in mind that during the pandemic, all aspects of real estate and mortgage closings are taking much longer than usual. Expect the closing on a new mortgage to take at least 60 days, with refinancing taking at least a month.
Why mortgage rates change
Mortgage rates are influenced by a range of economic factors, from inflation to unemployment numbers. Typically, higher inflation means higher interest rates and vice versa. As inflation rises, the dollar loses value, which in turn drives off investors for mortgage-backed securities, causing the prices to fall and yields to climb. When yields climb, rates get more expensive for borrowers.
A strong economy usually means more people buying homes, which drives demand for mortgages. This increased demand can push rates higher. The opposite is also true; less demand can trigger a drop in rates.
Current mortgage rate landscape
The current mortgage rate environment has been unstable because of the coronavirus pandemic, but generally rates have been low. Mortgage rates are rising and falling from week to week, as lenders are inundated with forbearance and refinance requests. In general, however, rates are consistently below 4 percent and even dipping into the mid to low 3s. This is an especially good time for people with good to excellent credit to lock in a low rate for a purchase loan. However, lenders are also raising credit standards for borrowers and demanding higher down payments as they try to dampen their risks.
Methodology: The rates you see above are Bankrate.com Site Averages. These calculations are run after the close of the previous business day and include rates and/or yields we have collected that day for a specific banking product. Bankrate.com site averages tend to be volatile — they help consumers see the movement of rates day to day. The institutions included in the “Bankrate.com Site Average” tables will be different from one day to the next, depending on which institutions’ rates we gather on a particular day for presentation on the site.
To learn more about the different rate averages Bankrate publishes, see “Understanding Bankrate’s Rate Averages.”
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