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Current Mortgage Rates Are Lower Than Last June

June 22nd, 2016 9:34 AM by Jackie A. Graves, President

Anyone out to buy or refinance a home this month will find current mortgage rates are lower than they were last June, which means you'll pay less for a loan.

That's surprising because it's been well over a year since the Federal Reserve ended a campaign to drive down long-term interest rates, a move that was widely expected to push mortgage rates higher.

Indeed, the average interest rate on a conventional 30-year fixed-rate home mortgage loan is more than two-fifths of a percentage point less than in early June 2015.

That decreases the payment on those loans — the most popular way to finance a home — by about $23 a month for every $100,000 borrowed. It reduces the total interest payments over the life of the loan by nearly $8,500.

And remember, that's the average cost of financing a home. Savvy borrowers with decent credit can almost always pay a quarter to half point less.

Spend a few minutes searching our extensive database for the best current mortgage rates from dozens of lenders in your area. You'll see what we mean.

National Average Mortgage Rates

Type of loan

Current average

Record-low average

Established

30-year fixed rate

3.74%

3.50%

Dec. 5, 2012

15-year fixed rate

3.00%

2.75%

May 1, 2013

30-year fixed jumbo

3.71%

3.68%

Feb. 11, 2016

5/1 ARM

3.13%

2.63%

May 1, 2013

 

Jumbo mortgages are cheap


One oddity that's carried over into this year is that the average cost of 30-year fixed-rate jumbo loans remains just below that of smaller 30-year fixed-rate conventional mortgages.

In fact, the 30-year jumbo mortgage has hit record lows this year.

Jumbo loans are mortgages that are too large to be purchased by Fannie Mae and Freddie Mac, the two government-owned companies that buy or guarantee most of the mortgages issued by banks and other lenders.

The largest loans they can buy depend on where the home is located but range from $417,000 in most places to $625,000 in the nation's most expensive cities.

Jumbo mortgages are most needed by affluent buyers whose savings and earnings have rebounded from the recession more quickly and fully than those of middle-income families.

They've driven a surge in the sales of high-end homes that has jumbo lending accounting for about one-fifth of all new mortgages, up from about 5% of the market in 2009.

The nation's largest banks, including J.P. Morgan Chase, Bank of America and Wells Fargo, are vying for that business not only by lowering rates but by reducing the minimum credit score and down payment required for million-dollar loans.

Last year, for example, J.P. Morgan announced it was lowering the minimum acceptable FICO score from 740 to 680 and accepting down payments of as little as 15% on homes up to $3 million.

The sale of such pricey property helped to push median home values, and the average amount Americans are borrowing to finance those purchases, to all-time highs, eclipsing previous records set at the peak of the housing bubble in 2006 and 2007.

Despite that, a report from the Consumer Financial Protection Bureau found that nearly half of Americans seriously consider only one lender or broker before applying for a mortgage. And about 75% fill out an application with only one lender.

We need to be doing more comparison shopping than that, especially when interest rates are rising.

Where mortgages rates are headed


The Federal Reserve was supposed to slowly start pushing interest rates higher this year, causing mortgage costs to steadily increase.

Indeed, the Mortgage Bankers Association projects the average cost of a 30-year fixed-rate loan will rise to 4.9% by the end of 2017 and 5.8% by 2018.

Of course, that hasn't yet been the case.

Home loans aren't only cheaper than last year, they're also becoming easier to get, even for buyers not in the jumbo market.

Home buyers who qualified for conventional loans had an average FICO credit score of 763 in 2012, according to Ellie Mae.

By 2015, that had fallen to 754, and that's about where it remained for all of last year, according to the most recent data.

The average FICO score for homeowners who refinanced through a conventional loan fell from 748 at the end of 2012 to 727 at the end of 2015.

In April, that moved to 732 for a conventional refinance, 753 for a purchase.

FHA loans clearly helped borrowers with too much debt and lower credit scores.

The average FICO score for those home buyers fell from 718 at the end of 2012 to 651 at the end of 2015. In April, it was at 685 for for an FHA purchase and 653 for a refinance.

Those are exactly the kinds of trends that help borrowers land the loans they need.

And with current mortgage rates remaining near historic lows, it's a great time to be in the market to purchase or refinance a home.

By: Mitch Strohm - To view the original article click here

Posted by Jackie A. Graves, President on June 22nd, 2016 9:34 AM

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