Mortgage Rates Today, October 12, 2020 | Rates dip
[BankRate]
Multiple benchmark mortgage rates receded today. The average rates on 30-year fixed and 15-year fixed mortgages both trended down. The average rate on 5/1 adjustable-rate mortgages, or ARMs, the most popular type of variable rate mortgage, advanced.
Mortgage rates are constantly changing, but they continue to represent a bargain compared to rates before the Great Recession. 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 rate you’ll pay for a 30-year fixed mortgage is 3.03 percent, down 2 basis points over the last week. Last month on the 12th, the average rate on a 30-year fixed mortgage was higher, at 3.05 percent.
At the current average rate, you’ll pay a combined $423.22 per month in principal and interest for every $100,000 you borrow. That’s a decline of $1.09 from last week.
15-year fixed mortgages
The average 15-year fixed-mortgage rate is 2.55 percent, down 1 basis point 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. The bigger payment may be a little more difficult to find room for in your monthly budget than a 30-year mortgage payment 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.
5/1 ARMs
The average rate on a 5/1 ARM is 3.12 percent, ticking up 3 basis points from a week ago.
These loan types are best for those who expect to sell or refinance before the first or second adjustment. Rates could be much higher when the loan first adjusts, and thereafter.
Monthly payments on a 5/1 ARM at 3.12 percent would cost about $428 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 projections.
Want to see where rates are right now? Lenders nationwide 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:
| Product | Rate | Last week | Change |
|---|---|---|---|
| 30-year fixed | 3.03% | 3.05% | -0.02 |
| 15-year fixed | 2.55% | 2.56% | -0.01 |
| 30-year fixed jumbo | 3.12% | 3.11% | +0.01 |
| 30-year fixed refinance | 3.18% | 3.04% | +0.14 |
Rate lock advice and recommendations
A rate lock guarantees your interest rate for a specified period of time. Lenders often offer 30-day rate locks for a nominal fee or roll the price of the lock into your loan. Some lenders will lock rates for longer periods, even exceeding 60 days, but those locks can be costly. 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.
Remember: 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, and expect refinancing to take at least a month.
Why do mortgage rates move up and down?
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.
What are current mortgage rates?
Mortgage rates have been volatile because of the COVID-19 pandemic. Generally, though, 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.
| 3-month trend | 30-Year Fixed Rates | 15-Year Fixed Rates | 5/1 ARM Rates | 30-Year Jumbo Rates |
|---|---|---|---|---|
| 10/7/2020 | 3.080% | 2.530% | 3.070% | 3.480% |
| 9/30/2020 | 3.050% | 2.490% | 3.170% | 3.500% |
| 9/23/2020 | 3.100% | 2.530% | 3.200% | 3.520% |
| 9/16/2020 | 3.090% | 2.530% | 3.210% | 3.550% |
| 9/9/2020 | 3.110% | 2.550% | 3.250% | 3.570% |
| 9/2/2020 | 3.100% | 2.560% | 3.240% | 3.550% |
| 8/26/2020 | 3.140% | 2.610% | 3.280% | 3.590% |
| 8/19/2020 | 3.140% | 2.640% | 3.280% | 3.590% |
| 8/12/2020 | 3.240% | 2.710% | 3.230% | 3.690% |
| 8/5/2020 | 3.220% | 2.670% | 3.330% | 3.690% |
| 7/29/2020 | 3.300% | 2.720% | 3.380% | 3.740% |
| 7/22/2020 | 3.330% | 2.670% | 3.400% | 3.770% |
| 7/15/2020 | 3.310% | 2.710% | 3.480% | 3.770% |
| 7/08/2020 | 3.360% | 2.750% | 3.470% | 3.810% |
BY ZACH WICHTER