Current Mortgage Rates, May 5, 2021 | Rates Drop Off

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A variety of key mortgage rates shrank today. The averages for both 30-year fixed and 15-year fixed mortgages took a tumble. At the same time, average rates for 5/1 adjustable-rate mortgages (ARM) also saw a decrease.

The averages for 30-year fixed, 15-year fixed, and 5/1 ARMs are:

Current Mortgage Refinance Rates

There’s good news if you’ve been considering a refinance, because the mean rates for 15-year fixed and 30-year fixed refinance loans slumped. Shorter term, 10-year fixed-rate refinance mortgages also slumped.

Today’s refinance rates are:

Take a look at mortgage rates for different types of loan.

30-Year Fixed-Rate Mortgages

The 30-year fixed-mortgage rate average is 3.06%, which is a decline of 5 basis points from the previous week.

You can use NextAdvisor’s mortgage calculator to work out what your monthly payments would be and calculate what you’ll save with additional payments. The mortgage calculator can also show you how much interest you’ll pay over the life of the loan

15-Year Fixed-Rate Mortgages

The median rate for a 15-year fixed mortgage is 2.34%, which is a decrease of 6 basis points from seven days ago.

A 15-year, fixed-rate mortgage’s monthly payment is larger than what you would pay with a 30-year mortgage. But, 15-year loans have some considerable benefits: You’ll save thousands of dollars in interest and pay off your loan much sooner.

5/1 Adjustable-Rate Mortgages

A 5/1 ARM has an average rate of 3.25%, a fall of 1 basis point from seven days ago.

An ARM is ideal for borrowers who will refinance or sell before the rate changes. If that’s not the case, their interest rates could end up being markedly higher after a rate adjusts.

For the first five years, a 5/1 ARM will typically have a lower interest rate compared to a 30-year fixed mortgage. Just keep in mind that your rate could climb higher and your payment might grow by hundreds of dollars a month.

Recent Mortgage Rate Movement

To see where mortgage rates are moving we rely on information collected by Bankrate, which is owned by the same parent company as NextAdvisor. Looking at mortgage rate history, we’re in an exceptionally low rate environment. This table has current average rates based on information provided to Bankrate by lenders nationwide:

Average mortgage interest rates
ProductRateLast weekChange
30-year fixed3.06%3.11%-0.05
15-year fixed2.34%2.40%-0.06
30-year jumbo mortgage rate3.07%3.12%-0.05
30-year mortgage refinance rate3.11%3.16%-0.05

Rates as of May 5, 2021.

There isn’t a single factor that causes mortgage rates to move, but rather there are many. Chief among them are things including inflation and even the unemployment rate. When you see inflation increasing, that usually means mortgage rates are about to climb higher. On the other hand, lower inflation typically accompanies lower mortgage rates. With higher inflation, the dollar becomes less valuable. This scenario pushes buyers away from mortgage-backed securities, which leads to price decreases and the need for increasing yields. And higher yields require borrowers to pay higher interest rates.

A strong economy has historically increased demand for homes. When more homes are sold, the demand for mortgages also increases, which can cause rates to go up. But the flip side is also true: A drop in demand for mortgages could signal a coming downturn in mortgage rates.

What Is in the Future for Mortgage Rates?

In February, mortgage rates increased, moving above 3% for the first time in more than seven months. However, rates are still near all-time lows, which is great news for borrowers. And for 2021, some experts predict mortgage rates won’t go much higher. Although in the second half of the year we could see rates gently climb higher.

The direction rates go will depend on the economy. And effectively dealing with the impacts of the coronavirus pandemic is key to our economic recovery. If spending increases, from the government and consumers, that’s likely to drive inflation higher. In this scenario, we’ll most likely see mortgage rates begin to climb upward. But in spite of the potential for rising inflation, it’s unlikely that we’ll see skyrocketing mortgage rates in 2021. One reason for this: the Federal Reserve believes that low interest rates will help the economy rebound. So it’s unlikely to make moves that could increase rates.

This Month’s Mortgage Predictions

Following the recent flurry of activity with mortgage rates, many experts are predicting mortgage rates will be calmer this month.

The economy is beginning to show signs of life and investors are expecting increased inflation. This has driven 10-year Treasury bond yields up, which is a key indicator for mortgage rates. But, the Federal Reserve has expressed a desire to keep rates low. Also, some in the industry believe that fears of inflation are somewhat overblown. So don’t expect to see a massive surge in rates this month.

This Week’s Mortgage Predictions

A modest rise is what some experts are forecasting for mortgage rates this week. This would be a bit of a leveling off from previous weeks.

While there is nothing this week that should cause a spike or dramatic downturn in rates, the unexpected can happen. And currently, the economy still has a long way to go to return to its pre-pandemic level.

Factors Influencing Today’s Mortgage Rates

Everything from the direction of the economy to your individual financial situation can influence mortgage rates. Not only that, but the type of mortgage and the property itself also make a difference.

Here are a few factors that influence rates:

  • Overall strength of the economy
  • Federal Reserve policy decisions
  • Consumer and government spending
  • 10-year U.S. Treasury yields
  • Rate of inflation
  • Individual circumstances: Loan-to-value ratio, credit history, and type of mortgage

How to Qualify for the Lowest Mortgage Rate

There are three key components to getting the lowest interest rate: Debt-to-income ratio (DTI), loan-to-value ratio (LTV), and your credit score.

To get the best interest rate, you’ll need a credit score somewhere between 700-800. Having a credit score above 800 is nice, but will likely have no major impact on your rate.

Your debt will affect not only the price of the house you can afford, but also your mortgage rate. The maximum debt-to-income ratio (DTI) for most mortgage loans is 43%. So If you make $3,000 a month you’d be allowed to have up to $1,290 in monthly bills. But a DTI of 28% or less is more likely to get you a reduction in your interest rate..

Lenders offer the most substantial mortgage rate reductions to borrowers that are deemed less risky. One surefire way to signal you’re a less risky borrower is to make a larger down payment. A down payment of 20% or more will save you money in two ways: with a more favorable mortgage rate, and you’ll be able to avoid paying for private mortgage insurance (PMI).

What You Need to Know About the Recent Rising Rates

We started off 2021 with mortgage rates dipping to a record low of 2.65%. In the weeks since then, the average 30-year fixed rates have steadily marched all the way up 3.09%. This increase is in line with what many experts have predicted, but it has happened earlier in 2021 than anticipated.

Rising rates can have a significant impact on your homebuying budget. The 0.44% increase we’ve experienced has increased the monthly payment on a 30-year $300,000 loan by $71 a month. But don’t expect current rates to cool off the red hot real estate market.

There is still a severe shortage of homes for sale. So as we enter peak buying season, expect to continue seeing homes sell quickly for above the asking price. Those trends can make it can be a frustrating market for buyers.

How We Got These Rates

The rates we have included are averages provided by Bankrate.com Site Averages and are calculated after the close of the previous business day. The lenders that the “Bankrate.com Site Average” tables include are not the same can change daily.

National lenders provide this mortgage rate information to Bankrate.com. It is possible the mortgage rates we reference has changed since this was published.

Mortgage Interest Rates by Loan Type

Home Purchase Rates

Mortgage Refinance Rates

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