Current market rates

The average 30-year fixed rate mortgage (FRM) rate and the 15-year FRM rate decreased during the week ending February 5, 2016 from the prior week. The 30-year FRM rate averaged 3.78% and the 15-year FRM rate averaged 2.86%. Mortgage rates have remained relatively low recently due to near-zero short-term borrowing rates set by the Federal Reserve (the Fed).

However, the Fed finally raised the short-term rate by 0.25% on December 17, 2015. The direction of FRM rates now depends on how the economy and bond market respond to the Fed’s short-term rate hike. If the economy slows, as it is likely to do, bond and FRM rates will remain flat in 2016. Conversely, if the rate hike does not weigh down the bond market, FRM rates are likely to rise in the latter half of 2016. In the meantime, FRM rates will continue to remain low due to the present lack of investment opportunities for the excess sums in bonds and on deposit with the Fed. This allows homebuyers to borrow more mortgage funds with relatively unchanged incomes. The increasing flow of international investment funds to the U.S. – due to a slowdown in the global economy – is also likely to drive up asset prices and keep FRM rates low over the next several months. 

Increased global investment in the 10-year Treasury Note indicates the rate on the 10-year T-Note will also remain low over the next several months. As of February 5, 2016, the 10-year T-Note rate is at 1.84%, down from the prior week. Lenders use the 10-year T-Note to determine a homebuyer’s mortgage rate. The difference between the note rate and the 10-year T-Note rate represents the lender’s risk premium, which covers potential losses due to mortgage default on a 20% down payment, private mortgage insurance (PMI) covering the added risk of a lesser down payment.

The spread between the 10-year T-Note and 30-year FRM rate is at 1.94%, well above the historical difference of 1.4%. Thus, though mortgage rates are low, the elevated spread indicates homebuyers are still overpaying for mortgages while lenders rake in the profits from increased risk premiums.

As of December 2015, the average adjustable rate mortgage (ARM) rate increased to 2.97%, above its low point experienced in May 2013. ARM use has already risen due to home prices rising faster than the rate of inflation (driven by speculation), causing buyers to take on more risk to extend their purchasing powerNow that the Fed has increased the short-term interest rate, ARM rates will respond immediately, rising proportionately – 0.25% – on the next adjustment. 

The monthly rates used to set ARM rates mainly increased in December 2015. The 3-month and 6-month Treasury bills, the 12-month Treasury average and the London inter-bank offered rate (LIBOR) increased, while the applicable federal rates remained roughly the same. 

Updated 02/05/2016. Original copy released 03/13/2012.

Click the link to go directly to a chart, or browse the charts by scrolling below.

1. 30-year fixed rate mortgage (FRM) rate, weekly — Chart update 02/05/16
2. 30-year FRM rate, monthly — Chart update 12/31/15
3. 15-year FRM rate — Chart update 02/05/16
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 12/31/15
5. 10-year Treasury note rate — Chart update 02/05/16
6. Combined FRM and 10-year Treasury note rates — Chart update 02/05/16
7. 91-day Treasury bill rate — Chart update 02/05/16
8. 3-month Treasury bill — Chart update 01/15/16
9. 6-month Treasury bill — Chart update 01/15/16
10. Treasury Securities average yield — Chart update 02/05/16
11. 12-month Treasury average — Chart update 01/15/16
12. Cost of Funds Index — Chart update 01/29/16
13. London Inter-Bank Offered rate (LIBOR) — Chart update 12/31/15
16. Applicable federal rates — Chart update 02/05/16
17. Private lender section 32 Reg-Z loans — Chart update 02/05/16

Average 30-Year Conventional Commitment Rate

Chart: Average 30-year FRM Rates, weekly

Chart update 02/05/16

Current
02/05/16
3.78%

Month ago
01/07/16
3.90%
Year ago
02/05/15
3.54%
Beginning January 2016, the average 30-year FRM rate in California is provided by Bankrate.com. Prior to January 2016, the 30-year FRM rate is provided by Freddie Mac’s survey of the Western Region of the U.S, which includes CA, AZ, NV, OR, WA, UT, ID, MT, HI, AK, and GU.

Average 30-Year Conventional Commitment Rate: 1991-present

Chart: 30-year FRM, monthly

Chart update 12/31/15
Dec 2015
Average
3.93%
Nov 2015
Average
3.91%
Dec 2014
Average
3.80%

Average 15-Year Conventional Commitment Rate

Chart: Average 15-year FRM Rates
Chart update 02/05/16
Current
02/05/16
2.86%
Month ago
01/07/16
3.09%
Year ago
02/05/15
2.87%
Beginning January 2016, the average 15-year FRM rate in California is provided by Bankrate.com. Prior to January 2016, the 15-year FRM rate is provided by Freddie Mac’s survey of the Western Region of the U.S.
More information:

5/1 Adjustable Rate Mortgage (ARM) Average Rate

Chart: ARM Average
Chart update 12/31/15
Dec 2015
2.97%
Nov 2015
2.90%
Dec 2014
2.73%
The 5/1 average adjustable rate mortgage (ARM) rate shows the average rate for the first five years after origination, as reported by Freddie Mac. After the initial five-year period, the ARM rate is adjusted annually based on an index figure, such as a certain Treasury Bill rate (which reflects Federal Reserve rate movements) or the London Inter-Bank Offered Rate (LIBOR).

10-Year T-Notes – Average Market Yield

Chart: 10-year Treasury Note Rate
Chart update 02/05/16
Current
02/05/16
1.84%
Month ago
01/07/16
2.15%
Year ago
02/05/15
1.82%
This rate is a leading indicator of the direction of future Freddie Mac rates. The 10-year rate historically runs closer to 4% during a stable money market. The rate is influenced by worldwide demand for the dollar and anticipated future domestic inflation.

Combined Average 15-, 30-Year Conventional Rates and 10-Year Treasury Note Average

Chart: FRM Rates vs. 10-year Treasury Note Average

Chart update 02/05/16
Avg 15-Year
Jan 2016
2.99%
Avg 30-Year
Jan 2016
3.84%
Avg 10-Year T-Note
Jan 2016
2.09%
The average 15- and 30-year conventional commitment rates are the rates at which a lender commits to lend mortgage money in the United States-West for the duration of the life of each respective mortgage as reported by Freddie Mac. The green line reflects the 10-Year Treasury Note Average, a leading indicator of the direction of future Freddie Mac rates. It is comprised of the level of worldwide demand for the dollar and anticipated future domestic inflation.

91-Day Treasury Bill – Average Auction Rate

Chart: 91-day Treasury Bill Rate

Chart update 02/05/16
Current
02/04/16
0.35%
Month Ago
01/07/16
0.22%
Year Ago
02/05/15
0.02%
This rate determines the minimum interest rate the seller must use in a delayed §1031 transaction and report when not receiving interest on §1031 monies held by a facilitator/accommodator. This rate also sets the amount of the ordinary income the facilitator/accommodator must report.

3-Month Treasury Bill

Chart: 3-month Treasury Bill

Chart update 01/15/16
Dec 2015
0.23%
Nov 2015
0.12%
Dec 2014
0.03%
The 3-Month Treasury Bill is the rate managed by the Federal Reserve through the Fed Funds Rate as the base price of borrowing money in the short-term. It is used in determining the yield spread, which predicts the likelihood of a recession one year forward. The posted rate is the monthly average for the listed month. Rates are released with a 1-2 month reporting delay.

6-Month Treasury Bill

Chart: 6-month Treasury Bill

Chart update 01/15/16
Dec 2015
0.49%
Nov 2015
0.32%
Dec 2014
0.11%

The six-month T-Bill rate is one of several indices used by lenders to periodically adjust the adjustable rate mortgage (ARM) rate. The adjusted rate equals the indexed rate (at the time of adjustment or an average of several prior rates) plus the lender’s profit margin. The posted rate is the monthly average for the listed month. Rates are released with a 1-2 month reporting delay.

Treasury Securities Average Yield — 1-Year Constant Maturity

Chart: Treasury Securities Average Yield

Chart update 02/05/16
Jan 2016
0.54%
Dec 2015
0.65%
Jan 2015
0.20%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate.The ARM interest rate equals T-Bill yield, plus the lender’s profit margin. The index is an average of T-Bill yields with maturities adjusted to one year.

12-Month Treasury Average

Chart: 12-month Treasury Avg

Chart update 01/15/16
Dec 2015
0.322%
Nov 2015
0.285%
Dec 2014
0.121%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. This figure is an average of the one-year T-Bill rates for the past 12 months.The ARM interest rate equals the 12-Month Treasury Average yield plus the lender’s profit margin. There is a one-two month lag in data reporting for the 12-Month Treasury Average.

Cost of Funds Index (COFI) (11th FHLBB District)

Chart: Cost of Funds

Chart update 01/29/16
Dec 2015
0.64%
Nov 2015
0.65%
Dec 2014
0.69%
This index is one of several indexes used by lenders to periodically adjust the interest rate on an ARM note. The ARM interest rate equals Cost of Funds Index, plus the lender’s profit margin. Current index reflects the cost of funds two months’ prior in the United States-West.

London Inter-Bank Offered Rate

Chart: LIBOR

Chart update 12/31/15
1 Month
0.42%
6 Month
0.83%
1 Year
1.15%
This index is one of several indexes used by lenders as stated in their ARM note to periodically adjust the note’s interest rate.The ARM interest rate equals the LIBOR rate plus the lender’s profit margin. The rate is set by the banks in London, England.

Applicable Federal Rates

Chart: Applicable Federal Rates

Chart update 02/05/16
Short (3 years or less)
Feb 2016
0.61%
Medium (3 to 9 years)
Feb 2016
1.39%
Long (9+ years)
Feb 2016
2.50%
These rates determine minimum interest yield reportable on carryback financing. The AFR category is determined by the carryback due date. *Rates are for monthly payments.

Rate Analysis for Private Lender Section 32 Reg-Z Loans

Data courtesy Federal Reserve

Chart update 02/05/16

Month* 6-Month 1-Year 2-Year 3-Year 5-Year 7-Year
January 2016 0.43% 0.54% 0.90% 1.14% 1.52% 1.85%
On junior trust deed loans, a margin of 5 – 8% points is added to the Index Figure (Cost-of-Funds Rate) for the maturity date of a Treasury bill equal in length to the payoff date of the loan to set the Section 32 threshold for term limitations. With this in mind, if the percentage of the total loan amount represented by points and fees is greater than the applicable Federal Securities Rate plus ten percentage points, additional disclosures, limitations and prohibitions are triggered by Regulation Z (Reg-Z) Section 32. [See first tuesday Form 223-1: Points and Fees Test and Form 223: Supplemental Truth-in-Lending Section 32 Disclosure]
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15 Comments

  1. asylum or insanity said:

    Aw, this was an exceptionally nice post. Taking thee time and
    actual effort to make a good article… but what can I say… I hesitate a lot and don’t manage to
    get nearly anything done.

  2. Donald Rubin said:

    Very useful and concise information. It really tells the story very well.

  3. Nick Burkey said:

    I’ll have to admit the information overload is a factor in understanding, however it is good to know that First Tuesday continues to track these indices. Each chart references a brief explanation of its meaning. With continued support like this, outside of the Lending Industry interpretations, I’m starting to catch-on. First Tuesday,
    you rock!

  4. BigIrr said:

    Excellent Set of GRAPHS 4 THE PUBLIC! 2 BAD THEY CAN’T UNDERSTAND IT UNLESS THEY HAVE A BUSINESS DEGREE LIKE ME!

  5. Carole Swanston said:

    Invest in property …while the rates are extremly low and our market prices in Ca.are half of the price as a home or piece of land 8-9 years ago. It may be years before we have a total recovery and the home price may not go up to where it was, butit is the best way to invest and cheaper to buy then to rent.

  6. ATHENA TUTORIAL ACADEMY said:

    How low can it go? The U.S. government–up to its ears in debt–is still able to borrow at unbelievably low rates (well under 2%) from foreign investors. That ability is currently based solely on the belief that American will always pay its debts and is a good investment risk.

    How about a little glimpse of macro-economics?

    Now could that perception ever change? If ever the foreign investors come to decide that America might not pay its debts, then we would see a sudden rise in interest rates that would boggle the mind, kicking off a massive inflation in consumer goods or plunging us into a deeper depression with deflation—take your pick.

    The U.S. government runs on borrowed money—borrowed from foreign investors.

    FACT: The massive U.S. debt as it currently stands, could NEVER be paid off. But if the dollar were devalued (as Roosevelt did in 1934) the debt might be paid off in cheaper dollars. This would be concomitant with a rise in the Chinese yuan.

    Here’s the catch: This would be done on the backs of the American people, as it would likely spur massive inflation and cause a spike in interest rates.

  7. ATHENA TUTORIAL ACADEMY said:

    With rates so low, and other investment vehicles so turbulent, it would make perfect sense to invest in housing for rental income at this time.

  8. gary broker said:

    You guys are great and I look to you for unadulterated truth.
    No fear of me straying with great articles like this.
    Next time I renew u can bet its with your program.

  9. Howard said:

    Really appreciate your continued current info on all types of market rates, sales, home prices, etc. Very useful for those of us working this business every single day.

  10. Jim said:

    Hi ,

    This is a very helpful analysis. Keep it up monthly for those that are serious about following ARMs.

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