Mortgage rates climb again

Claes Bell, CFA/Bankrate.com

Several benchmark mortgage rates ticked up earlier this week. The average rates on 30-year fixed and 15-year fixed mortgages both were higher. The average rate on 5/1 adjustable-rate mortgages, meanwhile, also increased.

Rates for mortgages are in a constant state of flux, 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 make sense to lock if you see a rate you like. Just make sure you’ve looked around for the best rate first.

The average rate for the benchmark 30-year fixed mortgage is 3.88 percent, an increase of 10 basis points over the last seven days. A month ago, the average rate on a 30-year fixed mortgage was lower, at 3.74 percent.

At the current average rate, you’ll pay $470.52 per month in principal and interest for every $100,000 you borrow. Compared to last week, that’s $5.70 higher.

The average 15-year fixed-mortgage rate is 3.20 percent, up 7 basis points since the same time last week.

Monthly payments on a 15-year fixed mortgage at that rate will cost around $700 per $100,000 borrowed. Yes, that payment is much bigger than it would be on a 30-year mortgage, 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 3.55 percent, rising 9 basis points over the last 7 days.

These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.

Monthly payments on a 5/1 ARM at 3.55 percent would cost about $452 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.

Derek Egeberg, a certified mortgage planning specialist and branch manager at Academy Mortgage believes rate will continue to rise. He said, “As the holiday shopping season continues, look for stronger economic signals and, as a result, higher interest rates.”

Elizabeth Rose, branch manager at Movement Mortgage, agrees, saying, “Good news for the economy translates to bad news for mortgage rates. And we’ve had some good economic data recently. The mortgage bond market is in a position to lose the recent improvements and move lower, which translates to higher mortgage rates.”

Brett Sinnott, vice president of capital markets for CMG Financial has a different view. “Mortgage rates continue to remain in the same general range helping existing and new home sales as seen with their respective results earlier in the month,” he said. “With another rate increase looming, pending home sales jumped to their highest reading in the past eight months. The worry becomes that if rates start their trend upward, we could see a rather quick and substantial drop in all home sales as borrowers adjust to higher monthly mortgage payments. The December rate increase is still expected and the hope is that investors have accounted for most of the movement as not to shock markets.”