Mortgage rates have risen again, with a 30-year mortgage averaging 3.3%, up 0.005 percentage point slightly from yesterday. Virtually all other loan forms also start the day higher.
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Even with today’s slight rise, interest rates are still very attractive. Well-qualified buyers who plan to buy a new mortgage or homeowners looking to reduce their mortgage payments by: refinancing should be able to take advantage of historically low rates.
- The final rate for a 30-year mortgage is 3.3%.
- The final rate for a 15-year mortgage is 2.4%.
- The final rate on a 5/1 jumbo ARM is 2.179%.
- The final rate on a 7/1 compliant ARM is 4.903%.
- The final rate on a 10/1 conforming ARM is 4.61%.
Current mortgage interest: 30-year fixed-rate mortgage
- The 30-year interest rate is 3.3%.
- That’s a day increase of 0.005 percentage point. ⇑
- That’s a month thecrease of 0.019 percentage point. ⇓
The 30-year fixed-rate mortgage is the most common mortgage because the interest and monthly costs do not change and the monthly costs are relatively low due to the long payback period. Compared to a shorter-term loan, the interest rate over a 30-year period is usually higher, meaning you pay more interest over time.
Current mortgage rate: 15 years fixed interest mortgage rates
- The 15-year interest rate is 2.4%.
- That’s a day thecrease of 0.004 percentage point. ⇓
- That’s a month increase of 0.01 percentage point. ⇑
Some borrowers prefer a shorter-term loan, such as a 15-year mortgage. Due to the short payback period, the monthly costs are higher than with a loan with a longer term, but the interest is usually lower. Due to the lower rate and shorter term, you pay less interest.
Current mortgage rate: 5/1 jumbo mortgage rate with adjustable interest
- The 5/1 ARM rate is 2.179%.
- That’s a day increase of 0.013 percentage point. ⇑
- That’s a month thecrease of 0.051 percentage point. ⇓
Another option is a variable rate mortgage. An ARM starts with a low, flat introductory rate and fixed monthly payments. Eventually, the rate will become variable, adapting to market conditions and resetting at specific intervals. Payments change with any changes in the rate.
For example, a 5/1 ARM has a fixed rate for five years, then the rate is annually adjustable and reset. There are a number of ARM terms to choose from, including a 7/1 and a 10/1. The payback period for floating rate mortgages is usually 30 years.
Current Mortgage Rates: 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 3.081%. ⇑
- The rate on a 30-year VA mortgage is 3.149%. ⇑
- The rate on a 30-year jumbo mortgage is 3.408%. ⇓
Current mortgage interest deduction
The average rates for 30-year bonds, 15-year bonds, and 5/1 jumbo ARMs are:
- The refinancing rate for a 30-year fixed-rate refinancing is 3.479%. ⇑
- The refinancing rate on a 15-year fixed rate refinancing is 2.517%. ⇓
- The refinancing rate on a 5/1 jumbo ARM is 2.447%. ⇑
- The refinancing rate on a 7/1 compliant ARM is 4.951%. ⇑
- The refinancing rate on a 10/1 compliant ARM is 4.829%. ⇑
Where are mortgage rates going this year?
Mortgage rates fell through 2020. Millions of homeowners responded to low mortgage rates by refinancing existing loans and taking out new ones. Many people bought homes that they might not have been able to afford had the rates been higher.
In January 2021, interest rates briefly fell to their all-time lows, but showed an upward trend throughout the month and into February.
Looking ahead, experts think interest rates will rise more in 2021, but modestly. Factors that could affect rates include how quickly the COVID-19 vaccines will be distributed and when lawmakers can agree on another economic aid package. More vaccinations and government incentives could lead to better economic conditions, raising rates.
While mortgage rates are likely to rise this year, experts say the rise won’t happen overnight and it won’t be a dramatic jump. Rates should remain near historically low levels in the first half of the year and rise slightly later in the year. Even with rising interest rates, it is still a favorable time to finance a new home or take out a mortgage.
Factors that affect mortgage interest rates include:
- The Federal Reserve. The Fed took swift action when the pandemic hit the United States in March 2020. The Fed announced plans to keep the money flowing through the economy by cutting the Federal Fund’s short-term 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 Treasury bills, which would support the home financing market. The Fed has repeatedly reaffirmed its commitment to this policy for the foreseeable future, most recently at a policy meeting in late January.
- The 10-year treasury. The mortgage interest rate moves along with the interest on the 10-year government bond. Yields fell below 1% for the first time in March 2020 and have been rising slowly ever since. Currently, interest rates have fluctuated above 1% since the beginning of the year, causing interest rates to rise slightly. On average, there is usually a 1.8 point spread between government bond yields and mortgage interest rates.
- The wider economy. Unemployment rates and changes 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 depress interest rates. 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 recovered somewhat, there is still a lot of room for improvement.
Tips to get the lowest possible mortgage interest
There is no universal mortgage rate that all borrowers receive. It takes some effort to qualify for the lowest mortgage rate and depends on both personal financial factors and market conditions.
Check your credit score and credit report. Errors or other red flags that can drag your credit score down. Borrowers with the highest credit scores are the ones who get the best rates, so it’s critical to check your credit report before beginning the house-hunting process. Taking steps to fix errors can increase your score. If you have a high credit card balance, paying it off can also be a quick boost.
Save money for a hefty 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 into a lower mortgage interest rate. Money lenders also like to see money that has been in an account for at least 60 days. It tells the lender that you have the money to finance the purchase of the home.
Shop around for the best price. Don’t settle for the first interest rate a lender offers you. Check with at least three different lenders to see who offers the lowest interest rate. In addition to traditional banks, consider different types of lenders such as credit unions and online lenders.
Also, take the time to learn about the different types of loans. While the 30-year fixed-rate mortgage is the most common type of mortgage, consider taking a shorter-term loan, such as a 15-year loan or a variable-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 suits your needs and financial situation. Government loans — such as those supported by the Federal Housing Authority, the Department of Veterans Affairs, and the Department of Agriculture — may be more affordable options for those who qualify.
Finally, fix your rate. By locking in your rate once you have found the right rate, loan product and lender, you can be sure that your mortgage interest rate will not rise before you take out the loan.
Our mortgage interest method
Money’s daily mortgage interest rates show the average rate offered by more than 8,000 lenders in the United States for which the most recent working day rates are available. Today we show rates for Monday, August 9, 2021. Our rates reflect what a typical borrower with a credit score of 700 would expect to pay for a home loan right now. These rates were offered to people who gave a 20% discount and include discount points.
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