Current Home Mortgage Rates

History of Home Mortgage Rates

The rise and fall of mortgage interest rates typically reflect the overall economy. Although mortgage rates are not determined by any single factor, rates fluctuate based on decisions by the Federal Reserve in New York. After carefully examining America’s finances, including things like inflation and exports, the Fed adjusts banking interest rates. These rates decide how easy it is to borrow money. Higher rates make it more difficult to pay off a loan, which makes people and businesses less likely to apply for one. This helps slow down the economy if the Fed feels it is moving too fast. Likewise, a stagnant economy will move the Fed to lower interest rates to encourage more business transactions and growth.

The interest rates the Fed adjusts affect how easy it is for financial institutions to move money back and forth. As the banks pay more, they pass the extra fees along to their customers, consequently making it more expensive to get a mortgage.

Mortgage rates are a good indicator of the strength and speed of the U.S. economy. Rates in the past decade have been relatively low compared to the 1980s when rates reached 17 percent.

Current Home Mortgage Rates

Rates have been below 8.5 percent since 1996, with some mortgage lenders offering rates as low as 5.5 percent in mid-2005. Since other factors, like credit history and salary, determine mortgage rates on an individual basis, individuals may have seen lower or higher rates.

The history of low rates allowed many people to buy their first homes, move into a larger home, or get an investment property. Housing prices also rose dramatically, keeping pace with the growing demand for homes.

Current home mortgage rates began to rise in 2006 with rates on a 30-year fixed mortgage reaching close to 6 percent. Although the rise has been slow, consider that a $200,000 home purchased at 5.5 percent has a monthly mortgage payment of $1135. That same home with a 6.0 percent interest rate would cost $1199 a month, a difference of $768 a year. Although this difference probably will not stop anyone from buying a new home, it may begin to affect how much people are willing to pay if the rates continue to rise.

With this increase, lenders are finding more customers who want to stick to traditional financial options while shying away from things like Adjustable Rate Mortgages. ARMs are typically more popular when rates are falling since the mortgage changes with the current rate. Homebuyers are taking a risk that interest rates will continue to fall, allowing them to have lower payments. With current home mortgage rates inching up, mortgagees are anxious to lock in the rates while they are still low.

Getting the Best Mortgage Rate

No matter what current home mortgage rates are, you can still work out a lower rate and keep your monthly costs down. Remember that mortgage lenders try to determine how big of a risk you are when they extend you a loan. If they think there is a good chance you will default on your mortgage, they will charge you a higher interest rate. The safer you seem, the better your rate.

The biggest factor in determining your risk is your credit history. Paying your bills on time and having a good credit score can get you a mortgage rate that is lower than the averages.

Buying points is another way to lower your mortgage rate. By paying this fee at closing, which is usually one percent of the loan, you can reduce your interest rate by a percentage point. However, you have to balance the amount of the point with how much you will save every month to see if it is worthwhile. If you only plan to be in your home for a few years, you may not get back the cost of the point.

Summary

Although current home mortgage rates are slowly rising, this is still a great time to be buying a home. Lenders have many Types of Mortgages available to homebuyers and rates are low enough to make new housing affordable.