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Mortgage rates crept a little bit higher again this week, with the 30-year FRM completing a rise of a little more than a quarter percentage point over the last month.

Freddie Mac reported today that the average offered interest rate for a conforming 30-year fixed-rate mortgage rose by 5 basis points (0.05%) to 3.02%, the first time it has cracked the 3 percent mark in over seven months. After a meaningful rise last week, conforming 15-year FRMs stalled at 2.34%, holding fast at that level for a second week. The erratic initial rate for conforming hybrid 5/1 ARMs dropped by 26 basis points, erasing a 22 basis point climb of a week ago and dropping back to 2.73% in the latest survey.

After a volatile couple of weeks, it appears that financial markets have settled a bit, and the bond yields that influence fixed mortgage rates seem to have found a new range to wander in. Firming economic activity and loosening restrictions on businesses, increasing vaccination and falling incidence of infection are increasing optimism about the prospects for full economic recovery. At the same time, the Fed's commitment to both low rate policies and bond buying plus the potential for perhaps another $1.9 trillion in new fiscal stimulus raise the possibility that both faster growth and higher inflation may lie ahead, and these are conditions that allow interest rates to firm.

Perspective matters, though. Rates are only about as high as they were last July, when folks were cheering them as at or near all-time low levels.

It looks as though the rise in rates that underlie mortgages has ceased for the moment, but with growing optimism that brighter economic skies are on the horizon there is little reason to expect them to retreat much. Holding steady to perhaps a slight softening is their most likely stance in the days ahead.

In each week's MarketTrends newsletter, we track and discuss economic conditions that affect mortgage rates and their impact on housing markets and consumers. Read the most recent edition on HSH.com or subscribe for email delivery.

Week 30-year-Fixed 15-year-Fixed 5-year-ARM
03/04 3.020% 2.340% 2.730%
02/25 2.970% 2.340% 2.990%
02/18 2.810% 2.210% 2.770%
02/11 2.730% 2.190% 2.790%
02/04 2.730% 2.210% 2.780%
01/28 2.730% 2.200% 2.800%
01/21 2.770% 2.210% 2.800%
01/14 2.790% 2.230% 3.120%
01/07 2.650% 2.160% 2.750%
12/31 2.670% 2.170% 2.710%
12/24 2.660% 2.190% 2.790%
12/17 2.670% 2.210% 2.790%

Mortgage Choices at a Glance

Loan type/terms Fixed 30 years Fixed 15 years/
20 Years
Hybrid ARM Traditional ARM Balloon Mortgage
Rate changes
  • Never; Fully fixed for entire term
  • Never; Fully fixed for entire term
  • Usually after fixed period of 3, 5, 7 or 10 years
  • After that, annual change typical
  • Fully variable
  • Typically changing at one-year intervals
  • Some have shorter change intervals
  • Never; Fully fixed for entire term
  • Low, stable payment
  • Usually easiest qualification
  • Stable payments
  • Builds equity faster
  • Lower total interest costs than 30-year term
  • Lower rates than fully fixed-rate mortgage
  • Can sometimes borrow larger loan amount for same income
  • Can have lowest interest rates
  • Qualification may not depend upon today's interest rate
  • Often has lower interest rate/monthly payment over balloon period than fixed rate
  • Similar to hybrid ARM
  • Can have highest total interest cost over time
  • User may "buy" more rate stability than actually needed, increasing cost
  • Requires higher income to qualify
  • Less affordable monthly payment
  • Funds commited to payment cannot be used elsewhere
  • Stable payment for a number of years, then unpredictable
  • Rates can jump by as much as 6 percentage points at first adjustment
  • Payments fluctuate at each rate change
  • Unpredictable, rates can change as much as 2 percentage points at each adjustment
  • Loan fully due and payable when balloon period ends
  • Must be paid off or refinanced in unknown market conditions
Alternative strategy
  • Consider Hybrid ARM with appropriate fixed period
  • Consider 30-year term and prepaying loan to preserve cash-flow flexibility
  • Consider Fixed rate mortgage or longest possible fixed period, if loan hold period not known
  • Consider Hybrid ARM to ameliorate rate and payment risks for a given period
  • Consider Hybrid ARM to ensure continued loan availability
These may be useful for...
  • Purchasing a home
  • First-time homebuyers
  • Refinancing to improve cash flow/lower payment
  • Refinancing to lower total interest cost
  • Retiring mortgage more quickly
  • Building or rebuilding equity more quickly
  • Purchasing or refinancing when time horizon is seven years or shorter, and where borrower can handle increase in monthly payments
  • Purchasing or refinancing when interest rates are near top of cycle, and are likely to fall, or sale or refinance is anticipated within three years
  • Purchasing or refinancing when time horizon is three years or longer and home will be sold prior to end of balloon period
Consider if
  • Buying or refinancing a home and planning on owning for longer than 10 years
  • Buying second home
  • Refinancing to build equity
  • Paying off mortgage before life event (retirement, etc)
  • Buying a home and expect to move before fixed period ends, or know income will rise to offset payment risk, even in worst-case scenario
  • Buying or refinancing when income can handle frequent payment changes and worst-case scenario for rates over a four-year period
  • Buying a home and expect to move before balloon period ends, or have resources to pay off mortgage if refinance not available
When shopping, ask about
  • "Full cost" vs. "No cost" refinances, prepaying loan to shorten term if desired
  • If 20-year term makes payment too high, whether 25-year term is available
  • Interest rate caps, for first and subsequent adjustments, worst-case scenario
  • A history of the Index the loan is keyed off, margin and caps
  • Whether or not there is any built-in refinancing option when the balloon period ends
Useful tools & resources

Latest Mortgage Rate Analysis

HSH's longer-range outlook for mortgage rates, where we review our last forecast,discuss current market influences and provide our expectations for mortgage rates over the next nine weeks.

Mortgage Calculators

Mortgage rates and more

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