The average 30-year fixed rate mortgage (FRM) rate for the week ending February 16, 2018 increased to 4.31%. The 15-year FRM rate increased to 3.65%. FRM rates have risen slowly but consistently since mid-2017, and will continue this trend through the end of the current recovery, around 2020-2021.



As we head into 2018, a period of a decelerating economic pace, the decade -old recovery will be kept from overheating by a combination of Federal Reserve (Fed) rate hikes and general government chaos.

Consider that FRM rates are tied to the bond market and, thus, usually move in tandem with the 10-year Treasury Note (T-Note) rate. Due to today’s scarcity of investment opportunities with a dearth of business starts and a weakening forward demand for mortgages as government uncertainty over fiscal rectitude continues, excess funds held by the wealthy naturally flow into the bond market. These conditions will keep FRM rates relatively low, not to rise significantly until we go into an economic boom period.

Mortgage lenders use the 10-year T-Note to determine a homebuyer’s FRM rate. Meanwhile, adjustable rate mortgage (ARM) rates are tied to short-term interest rates set by the Fed, rising in recoveries and falling in recessions.

The current spread between the 10-year T-Note and 30-year FRM rate is now 1.44%, below the historical difference of 1.5%. A downward trend from a more elevated spread has emerged since the Great Recession. Further, the forward condition of excess mortgage funds and a weak demand for mortgage originations will likely keep the spread below 1.5% in 2018. Thus, the FRM interest rate will not be the drag on home sales that lack of construction and the resulting excessive home pricing over the past decade has been.

At some point in the next couple of years, investors will exit the stock market and pile into government bonds. This will bring on a decline in the 10-year T-Note rate and a drop in FRM rates, a stimulus for home sales by brokers and builders.



As of January 2018, the average monthly rate on ARMs increased substantially to 3.79%, far above its low point of 2.49% experienced in May 2013. The use of ARMs to fund the purchase of homes has gradually risen over the past year. The rise is due to home prices accelerating faster than the rate of pay. This tends to cause wealthier buyers to take on more risky ARMs to extend their purchasing power.

However, each Fed hike in the short-term interest rate pushes up the ARM rate proportionately, making the ARM more costly and less attractive.

The reduction in the MID (mortgage interest deduction) will further reduce the demand for ARMs since they are the primary source of mortgages for homes priced over $850,000.

Updated 02/16/2018. 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 02/16/18
2. 30-year FRM rate, monthly — Chart update 02/02/18
3. 15-year FRM rate — Chart update 02/16/18
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 02/02/18
5. 10-year Treasury note rate — Chart update 02/16/18
6. Combined FRM and 10-year Treasury note rates — Chart update 02/02/18
7. 91-day Treasury bill rate — Chart update 01/26/18
8. 3-month Treasury bill — Chart update 02/09/18
9. 6-month Treasury bill — Chart update 02/09/18
10. Treasury Securities average yield — Chart update 02/02/18
11. 12-month Treasury average — Chart update 02/09/18
12. Cost of Funds Index — Chart update 12/29/17
13. London Inter-Bank Offered rate (LIBOR) — Chart update 12/29/17
14. Applicable federal rates — Chart update 12/08/17
15. Private lender section 32 Reg-Z loans — Chart update 02/02/18

Average 30-Year Conventional Commitment Rate

Chart: 30-year FRM rate, weekly

Chart update 02/16/18

Current
02/16/18
4.31%

Month ago
01/19/17
3.95%
Year ago
02/17/17
3.98%
The average 30-year FRM rate in California is provided by Bankrate.com.

Average 30-Year Conventional Commitment Rate: 1991-present

Chart: 30-year FRM rate

Chart update 02/02/18
Jan 2018
Average
3.97%
Dec 2017
Average
3.85%
Jan 2017
Average
4.00%

Average 15-Year Conventional Commitment Rate

Chart: 15-year FRM rate

Chart update 02/16/18
Current
02/16/18
3.65%
Month ago
01/19/17
3.30%
Year ago
02/17/17
3.14%
The average 15-year FRM rate in California is provided by Bankrate.com.
More information:

5/1 Adjustable Rate Mortgage (ARM) Average Rate

Chart: ARM average
Chart update 02/02/18
Jan 2018
3.79%
Dec 2017
3.53%
Jan 2017
3.32%
The 5/1 average adjustable rate mortgage (ARM) rate shows the average rate for the first five years after origination. 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). Beginning January 2016, the average ARM rate in California is provided by Bankrate.com. Prior to January 2016, the average ARM rate is provided by Freddie Mac’s survey of the Western Region of the U.S.

10-Year T-Notes – Average Market Yield

Chart: 10-year T note

Chart update 02/16/18
Current
02/16/18
2.87%
Month ago
01/19/17
2.66%
Year ago
02/17/17
2.42%
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: Combo rates

Chart update 02/02/18
Avg 15-Year
Jan 2018
3.32%
Avg 30-Year
Jan 2018
3.97%
Avg 10-Year T-Note
Jan 2018
2.58%
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/California 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.
More information:

91-Day Treasury Bill – Average Auction Rate

Chart: 91-day T bill rate

Chart update 01/26/17
Current
01/25/18
1.43%
Month Ago
12/28/17
1.45%
Year Ago
01/26/17
0.51%
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 02/09/18
Jan 2018
1.41%
Dec 2017
1.32%
Jan 2017
0.51%
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 02/09/18
 Jan 2018
1.59%
Dec 2017
1.47%
Jan 2017
0.61%

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

Chart update 02/02/18
Jan 2018
1.80%
Dec 2017
1.70%
Jan 2017
0.83%
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 average

Chart update 02/09/18
Jan 2018
1.59%
Dec 2017
1.47%
Jan 2017
0.61%
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 12/29/17
Nov 2017
0.74%
Oct 2017
0.73%
Nov 2016
0.60%
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 12/29/17
1 Month
1.56%
6 Month
1.83%
1 Year
2.10%
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 Fed Rates

Chart update 12/08/17
Short (3 years or less)
Dec 2017
1.12%
Medium (3 to 9 years)
Dec 2017
1.55%
Long (9+ years)
Dec 2017
1.94%
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 02/02/18

Month* 6-Month 1-Year 2-Year 3-Year 5-Year 7-Year
Jan 2018 1.62% 1.80% 2.03% 2.15% 2.38% 2.51%
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 RPI Form 223-1: Points and Fees Test and Form 223: Supplemental Truth-in-Lending Section 32 Disclosure]
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