Are you in the market for a 15-year mortgage loan? Then I have some good news. The average rate for a 15-year fixed mortgage dropped below 3% this week.
According to the weekly market survey conducted by Freddie Mac, the average interest rate assigned to 15-year home loans in the U.S. fell to 2.98% this week. That’s a decrease of five basis points (0.05%) from last week’s average of 3.03%.
That marks the second time this quarter the 15-year mortgage rate average has dipped below the 3% mark. On October 8, it dropped to 2.99%. The last time we saw rates this low for this particular loan category was April 30, when it fell to 2.94%.
Thirty-year loans dropped three basis points this week compared to last, landing at 3.79%.
Current 15-Year Mortgage Rates 7 Basis Points Below January
To give you some perspective, we started the year with 15-year mortgage rates at 3.05%. For most of 2015, they’ve been fluctuating above the 3% mark, climbing as high as 3.25% over the summer. That means today’s rates in the 15-year product category are seven basis points (0.07%) lower than where we were at the start of 2015.
This trend can be seen in other loan categories as well. The 5-year adjustable (ARM) loan started the year with an average rate around 3%. In this week’s survey, the 5-year ARM average was down to 2.89%. The current average rate for a 30-year fixed mortgage, on the other hand, is almost exactly the same as it was in January 2015. So it has been a pretty stable year for borrowers.
This flies in the face of earlier predictions that said rates would likely rise steadily throughout 2015. Apparently, some crystal balls need to be re-calibrated.
Will Fed Introduce a Rate Hike in October or December?
The Federal Reserve is expected to increase the short-term federal funds rate later this year or early next. The Fed has kept the funds rate near zero for years now, as part of a broader stimulus program designed to spur the economy.
They’ve been monitoring the nation’s jobless rate (and other indicators) to decide when to increase interest rates. At their last committee meeting, Fed officials decided to preserve the status quo.
Some housing analysts have said the Fed probably won’t make a move until 2016. For example, Joseph LaVorgna, the chief economist for Deutsche Bank, recently told CNBC he thinks the Fed will increase rates in March 2016.
Federal Reserve officials will have two more opportunities to increase rates this year. Their next committee meeting is scheduled for October 27 – 28, and the last one of the year takes place on December 15 – 16.
But even if the Fed does introduce a rate hike this year, it probably won’t have a huge impact on 30- or 15-year mortgage rates. According to Selma Hepp, an economist who wrote for Trulia:
“If rates increase 25 basis points, mortgage rates are still at historical lows and exceptionally favorable for homebuyers. The actual impact on a typical homebuyer will be marginal, but this really depends on the buyer’s budget.”
So there’s a good chance home loan rates will remain relatively stable through the end of 2015, and possibly into the start of 2016 as well. But now we’re getting into the crystal ball stuff again, and that’s been covered already.
Disclaimers: This story contains third-party data that are deemed reliable but not guaranteed. It also contains forward-looking statements regarding Federal Reserve policy and mortgage industry trends. economic conditions. Such statements are the equivalent of an educated guess and should not be viewed as facts. The Home Buying Institute makes no claims or assertions about the future or 15-year mortgage rates, or interest rates in general.