Mortgage rates slide down

BY ADRIAN D. GARCIA/BANKRATE.COM

Multiple closely watched mortgage rates sunk lower this week. The average rates on 30-year fixed and 15-year fixed mortgages both decreased. Meanwhile, the average rate on 5/1 adjustable-rate mortgages also fell.

Mortgage rates are in a constant state of flux, but, overall, they are very low by historical standards. If you’re in the market for a mortgage, it could make sense to go ahead and lock if you see a rate you like. Just make sure you’ve looked around for the best rate first.

The average 30-year fixed-mortgage rate is 3.81 percent, a decrease of 2 basis points over the last seven days. A month ago, the average rate on a 30-year fixed mortgage was higher, at 3.89 percent.

At the current average rate, you’ll pay a combined $466.53 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $1.14 lower.

The average 15-year fixed-mortgage rate is 3.21 percent, down 3 basis points over the last seven days.

Monthly payments on a 15-year fixed mortgage at that rate will cost around $701 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 3.91 percent, ticking down 9 basis points over the last seven 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 3.91 percent would cost about $472 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.

Greg McBride, CFA and senior vice president and chief financial analyst of Bankrate.com is one of 42 percent of the experts who expect rates to head back up. He said, “Despite a near-certain rate cut at month-end, long-term yields have rebounded a bit because the economy is still growing at a decent pace and it certainly isn’t falling apart.”

Shashank Shekharm, CEO of Arcus Lending is among the nine percent who believe rates will keep going down. He said, “After touching an 18-month low earlier in the month, mortgage rates have slowly inched up in the last two weeks. We might see a trend reversal this week. We are getting conflicting news on the economy. Although the industrial side of the economy has been slowing, (consumers are) still spending and outperforming expectations. The Fed is almost certain to cut the rate by 0.25 percent at the end of the month. Given all this, I expect the mortgage bonds to improve in pricing and, thus, the rate to the borrower should be just a tad lower this week.”

Fifty percent of the experts believe rates will stay the same over the next week. Michael Becker, a branch manager at Sierra Pacific Mortgage, said, “Treasury yields and mortgage rates are falling because of President Trump’s threat of increased tariffs on China. Recently, rates had moved higher because of improved economic data. However, rates have been mostly range-bound in recent weeks, and markets are waiting for guidance from the Federal Reserve on potential future rate cuts. The Fed meets at the end of the month. So, until then and for the next week, I expect mortgage rates to remain range-bound or flat.”

Logan Mohtashami, a senior loan officer at the AMC Lending Group, said, “Last week, I talked about the upper range of the 10-year range was 2.07 percent if we got a close above that and follow through. The next day we broke this channel, and we got close at 2.14 percent, but no follow-through action whatsoever, and now yields are right back down to 2.07 percent. Right now, the channel is between 1.94 percent to 2.14 percent, and we have been here some time because this 2 percent level on the 10-year yield has proven a severe level to break.”

Jim Sahnger, a mortgage planner with the C2 Financial Corporation, added, “Lots of data, little direction. There has been mixed data this month, starting off with the hotter-than-expected employment report, inflation and retail sales numbers. Could these be at the peak of the numbers before the much-anticipated economic slowing starts to gain momentum? Time will tell. With the upcoming Fed meeting on the horizon, many expect a rate cut — and not just a quarter point, but some are in favor of a (half-point cut). While Fed funds doesn’t impact mortgage rates, a declining overall interest rate complex would. For the short term, though, look for mortgage rates to remain basically unchanged.”