It’s a mixed week for mortgage rates

BY ADRIAN D. GARCIA/BANKRATE.COM

Mortgage rates diverged this week, but one key rate fell. The average for a 30-year fixed-rate mortgage fell, but the average rate on a 15-year fixed advanced. The average rate on 5/1 adjustable-rate mortgages, meanwhile, held firm.

The average rate you’ll pay for a 30-year fixed mortgage is 3.70 percent, a decrease of 1 basis point over the last seven days. A month ago, the average rate on a 30-year fixed mortgage was higher, at 3.77 percent.

At the current average rate, you’ll pay principal and interest of $460.28 for every $100,000 you borrow. That’s down $0.57 from what it would have been last week.

The average 15-year fixed-mortgage rate is 3.18 percent, up 2 basis points over the last seven days.

Monthly payments on a 15-year fixed mortgage at that rate will cost around $699 per $100,000 borrowed. That may squeeze your monthly budget than a 30-year mortgage 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.

The average rate on a 5/1 ARM is 4.01 percent, unchanged 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 4.01 percent would cost about $478 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.

Michael Cox, the founding director and executive-in-residence of the O’Neil Center for Global Markets & Freedom at the SMU Cox School of Business and former chief economist for the Dallas Federal Reserve Bank, is one of the 27 percent of experts who see rates going up. He said, “Up is my bet on interest rates this week. As predicted, the inverted yield curve that the U.S. saw mid-year was not a harbinger of recession. The U.S. economy was still fairly strong and would keep on growing, extending the expansion past its already-established record length. Once the market came to realize that the economic weakness was not going to materialize, the downward pressure on rates coming from expected economic weakness subsided, allowing rates to head back up to more normal long term levels. I expect this trend to continue for the time being.

Dick Lepre, a senior loan officer at RPM Mortgage, joins the 46 percent of experts who believe rates will go down. He said, “In the short term, the tech are bullish and should see slightly lower Treasury yields in the coming week. The Treasury techs are quite bullish (higher prices, lower yields.) The annoying disconnect between Treasuries and MBS make the fate of mortgages a bit less clear in the coming week. Treasury is issuing a ton of debt, which always gets first dibs on fixed-income securities.”

Mitch Ohlbaum, a loan officer with Macoy Capital Partners, adds, “Rates will go down. The 10-year is trading at 1.784 percent down from the most recent high of 1.945 percent just 11 days ago. Housing starts rebounded in October after slumping in September with multifamily leading the segment with a surge of 8.6 percent. Building permits climbed 5 percent to the highest level in 12 years, which is a significant signal about confidence. Still in the balance is the U.S.-china trade talks which would of course, have an impact on rates. Overall, we do not have any negative economic news signaling a strong economy as we head into the last 45 days of 2019.”

Michael Becker, a branch manager at Sierra Pacific Mortgage, said, “Hope for a trade deal or at least phase one of a trade deal between the U.S. and China has waned. Mortgage rates have improved because of this. However, we are now at a level where there is resistance to continued improvement, so I don’t expect further improvement in rates. Rates will be steady or flat in the coming week.”

Logan Mohtashami, a senior loan officer at AMC Lending Group, said, “Short term, the closer we get to Dec. 15, the more you need to be mindful of trade-war tariff tweets, since the markets are at all-time highs, and the VIX is low. The trade-war tap dance and PMI data are things you should be watching.