Several closely watched mortgage rates fell today. The average for a 30-year fixed-rate mortgage receded, but the average rate on a 15-year fixed remained steady. The average rate on 5/1 adjustable-rate mortgages, or ARMs, the most popular type of variable rate mortgage, tapered off.
Mortgage rates change daily, but they have remained in a historically low range for quite some time. If you’re in the market for a mortgage, it could be a great time to lock in a rate. Just don’t do so without shopping around first.
30-year fixed mortgages
The average 30-year fixed-mortgage rate is 3.04 percent, down 4 basis points since the same time last week. This time a month ago, the average rate on a 30-year fixed mortgage was higher, at 3.14 percent.
At the current average rate, you’ll pay principal and interest of $423.76 for every $100,000 you borrow. That’s down $2.17 from what it would have been last week.
You can use Bankrate’s mortgage rate calculator to figure out your monthly payments and see what the effects of making extra payments would be. 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 2.54 percent, unchanged since the same time last week.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $669 per $100,000 borrowed. That’s clearly much higher than the monthly payment would be on a 30-year mortgage at that rate, 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 faster.
The average rate on a 5/1 ARM is 3.33 percent, sliding 2 basis points over the last week.
These loan types are best for those who expect to sell or refinance before the first or second adjustment. Rates could be considerably higher when the loan first adjusts, and thereafter.
Monthly payments on a 5/1 ARM at 3.33 percent would cost about $440 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher 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 nationwide respond to our 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 as of September 15, 2020.
Lock your mortgage rate now or wait?
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, even exceeding 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.
The benefit of a rate lock is that 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 there is no guarantee of where mortgage rates will head in the future, it may be smart to lock in a low rate instead of holding out on rates for potentially decline further.
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.
What causes mortgage rates to move
A number of economic factors influence mortgage rates. Among them are inflation and unemployment. Higher inflation typically leads to higher mortgage rates. The opposite is also true; when inflation is low, mortgage rates typically are as well. As inflation increases, the dollar loses value. That drives investors away from mortgage-backed securities (MBS), which causes the prices to decrease and yields to increase. When yields move higher, rates become more expensive for borrowers.
Generally speaking, when the economy is strong, more people buy homes. That drives demand for mortgages. Increased demand for mortgages can cause rates to increase. The opposite is also true; less demand can lead to lower rates.
Current mortgage rate landscape
The current mortgage rate environment has been unstable because of the coronavirus pandemic, but generally rates have been low. For a while, some lenders were increasing rates because they were struggling to deal with the demand. 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 “Bankrate’s Rate Averages Methodology.”