Mortgage rates trend down

BY CLAES BELL, CFA/BANKRATE.COM

Several benchmark mortgage rates trended down earlier this week. The average for a 30-year fixed-rate mortgage was down, but the average rate on a 15-year fixed rose. On the variable-mortgage side, the average rate on 5/1 adjustable-rate mortgages decreased.

Rates for mortgages change daily, but they continue to represent a bargain compared to rates before the Great Recession. If you’re in the market for a mortgage, it may make sense to lock if you see a rate you like. Just make sure you shop around first.

The average rate for the benchmark 30-year fixed mortgage is 4.28 percent, a decrease of 3 basis points over the last seven days. A month ago, the average rate on a 30-year fixed mortgage was lower, at 4.16 percent.

At the current average rate, you’ll pay $493.70 per month in principal and interest for every $100,000 you borrow. That represents a decline of $1.76 over what it would have been last week.

The average 15-year fixed-mortgage rate is 3.72 percent, up 2 basis points from a week ago.

Monthly payments on a 15-year fixed mortgage at that rate will cost around $726 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 come out several thousand dollars ahead 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 4.12 percent, sliding 5 basis points since the same time last week.

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 4.12 percent would cost about $484 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.

Shaun Guerro, branch manager of New American Funding, believes rates will trend higher.

He says that mortgage rates are really at a crossroads.

“My old high school football coach, Carlton Cooper, always said, ‘When in doubt, throw the out.’ In other words, the markets have not really been playing in our favor. There is a good chance, based on the technical signals that rates may get worse. So, before they go higher, flee to safety and take the ‘Out Route’ by locking in now,” he said.

Michael Becker, branch manager at Sierra Pacific Mortgage, said he believes rates will hold steady for now.

“Thankfully mortgage rates have seemed to stabilize over the last few days. Given the large amount of debt the U.S. Treasury is selling this week, this is a welcomed situation. Whether they stay here or go higher will depend on what is in the Fed minutes. Should the Fed hint at increasing their number of rate hikes, we could see mortgage rates move higher. I think the minutes won’t show this and that rates will be flat in the coming week.”

Les Parker is one of the few financial experts who sees rates going down.

“Here’s a song parody that became the first single to top the charts in the U.S. posthumously. Sitting on the locks of the day; Watchin’ the screen, scroll away. Sittin’ on the locks of the day; Markin’ time. Technically interest rates should go higher, but the global equity markets still present ugly technical pictures worldwide. Provided the dollar remains stable to strong, expect lower rates soon.”