The average rate for 30 year fixed mortgages dropped in recent weeks (Jan 2019) to 4.45%. Despite the often alarming reports that mortgage interest rates are going up, the worst claims are unjustified.
Here is an overview of what has happened to 30-year fixed-rate mortgages. This is based on an average for lenders across the country, compiled every week by Freddie Mac, a corporation formed by Congress in 1970 to underwrite home mortgages.
- In 2016, mortgage interest rates dropped to a record low of about 3.4%.
- In 2017, rates rose rapidly to about 4%.
- In 2018, rates again rose rapidly to about 4.5% and peaked in November close to 5%.
- In December 2018, rates began to drop from a peak of 4.94% and appear to be holding at 4.45%, a decrease of 8%.
15-year fixed and 5-year adjustable rates are lower than 30-year fixed rate loans, both at about 3.9%.
What you can expect for mortgage rates in 2019
Economists are predicting an increase in rates to about 5% by the end of 2019. Here is a summary of their predictions:
| Quarter 2019 | Freddie Mac | Fannie Mae | Mortgage Bankers Assoc | National Assoc Realtors | Average |
|---|---|---|---|---|---|
| Q1 | 4.9 | 4.8 | 4.8 | 4.7 | 4.80 |
| Q2 | 5.0 | 4.8 | 4.9 | 4.8 | 4.88 |
| Q3 | 5.2 | 4.8 | 5.0 | 4.9 | 4.98 |
| Q4 | 5.3 | 4.8 | 5.0 | 5.0 | 5.03 |
What does a change in mortgage rate mean for you?
If you buy a Marin home for $1,350,000 (the median sale price for a single family home in 2018), with a 20% down payment, here are the payments for a mortgage of $1,080,000 at different interest rates:
| Mortgage Interest Rate | Monthly Payment |
|---|---|
| 3.5% | $4,850 |
| 4.% | $5,156 |
| 4.5% | $5,472 |
| 5.0% | $5,798 |
Factors that affect your mortgage rate
There are many factors that can change your mortgage rate, including:
- A loan less or equal to $726,525 is a conforming loan (for 2019). Conforming loans usually have lower interest rates than Jumbo loans, over $726,525.
- Amount of down payment relative to the loan.
- The borrower’s debt-to-income ratio. This is the percentage of your monthly income used for recurring payments, including the new mortgage, car loans, and so on. This should be 45% or lower.
- The type of property.
- The borrower’s credit score and history.
- The lenght of the loan. It may be worth considering a shorter loan with a lower interest rate.
To navigate this complex process, we highly recommend that you consult a professional mortgage broker. We also recommend that you use a local mortgage broker with an established reputation in the community. This can give you the best deal and personal service. An established, local broker can also help you to buy a home when there are competitive offers; sellers and their real estate agents have higher confidence in closing the sale if the mortgage broker is known and respected. Contact Madeline for recommendations.
