Buying a home is the most significant purchase most Americans will make in a lifetime. According to Zillow, the average cost of a home this year is right around $250,000. Putting your hard-earned dollars towards a place to call home can be an excellent investment, as long as your mortgage rates aren’t too high.
Mortgage rates today are significantly lower, but some lenders have stopped offering refinancing options. Currently, the average 30-year fixed rate is around 3.55%, which is the lowest it’s been since September of 2016.
The question is if you find a low rate, should you lock it in, or could mortgage rates drop again? This guide will answer questions about mortgage rates and take a look at how they’ve changed over the last 10 years.
What Are Mortgage Rates Today?
Due to concerns about Covid-19, the Federal Reserve cut interest rates across the board. At the beginning of March, they dropped from 1.5% to 1.0%. A few weeks later, they fell to 0.25%. Plus, the Fed promised to buy about $200 billion in mortgage-backed securities, which may or may not affect the interest rate you could get on a mortgage. The Fed doesn’t set mortgage rates, but its decisions do impact the market.
After the initial interest cut, for example, 30-year mortgage rates reached a record low at 3.29%. After the second interest cut, though, the mortgage interest rate moved back up to 3.65%. The lesson learned is that sometimes the Federal Reserve’s rate cuts can result in an inverse effect on national mortgage rates.
The MSB (mortgage-backed securities) market also affects mortgage rates. If the demand is up for MSB, mortgage rates typically drop. Thus, the Fed buying $200 billion in MSB helps to increase demand, which, in turn, reduces home loan interest rates.
What Are Average Mortgage Purchase Rates for a 30-Year, 15-Year, and 5/1 ARM This Year?
30-year mortgage rates today are right around 3.78% APR. Since the same time last week, the new price accounts for a decrease of 4 basis points. About a few months ago, the average rate was around 3.79% for a 30-year fixed mortgage.
Current mortgage rates for a 15-year fixed mortgage is 3.19% APR. While that larger payment could make things a bit tougher, especially considering the country’s current economic state, you’d save thousands of dollars over the life of your loan in total interest paid. Thus, you’d build your equity at a significantly faster rate.
The average mortgage rate for a 5/1 ARM dropped to 3.63% APR. The 5/1 ARM mortgage works best for those who expect to refinance or sell before the 1st or 2nd adjustment. Even though monthly payments would cost around $440 for every $100,000 borrowed, rates could rise substantially after those 5 years.
What Are Average Refinance Rates This Year?
Currently, the average 30-year refinance rate is about 3.81% APR. The rate was 3.87% 1 month ago.
The 15-year fixed refinance average rate is up 3.22% APR. While that payment is significantly higher than those on the 30-year fixed mortgage, the long-term savings are well worth it if you can afford it.
Will Mortgage Rates Go Down This Year?
Over 10 years ago, the Federal Reserve conducted 3 rounds of bond-buying to save the housing market and stimulate economic growth during the financial crisis. The main goal isn’t to push mortgage rates down. However, lower rates are an expected consequence of putting billions towards mortgage-backed securities. This year, prices have already gone down because of the Fed’s contribution.
How Low Could Mortgage Rates Go?
Right before Covid-19 disrupted the markets, the average rate for a 30-year fixed mortgage rate in the United States dropped to 3.29%, which was the lowest ever recorded rate. The 30-year fixed mortgage can continue to decrease, but whether or not that will happen remains to be seen. It should stay right around the 3% range, for the time being, give or take. However, no one knows for sure. Lenders can’t handle the volume right now, and investors aren’t buying mortgages at that expected rate. There has there been such a lockdown of United States businesses. Unemployment claims have skyrocketed. However, if the economy makes a quick recovery, we could see a post-quarantine boom, which might cause mortgage rates to rise.
Mortgage Rates Today Are Low
There’s no question that mortgage rates today are low. The question is, will those mortgage rates stay where they are, drop even lower, or start rising after an economic comeback?
If you’ve received a good offer but are still unsure, consider locking in an offer while you look around at others. Pay attention to the behavior of your lender. Any reputable lender should offer exceptional customer service. Make sure you have a reliable point of contact, too, should any questions or issues come up along the duration of your loan.
If you want to eliminate the headache of perusing multiple lenders, we can match you with the right one today. Whether you’re looking to refinance or to take out a new mortgage altogether, we are here to help!
Check out our personal finance blog for more ways to save!