The average 30-year fixed rate mortgage (FRM) rate decreased to 3.87% during the week ending July 21, 2017. The 15-year FRM rate also decreased to 3.05%. 

Like the “taper tantrum” in 2013 when the Federal Reserve (the Fed) announced the end of their pumping additional money into the banking system, the financial market recently saw a “Trump jump” due to post-election investor activity — a bounce that is now gradually losing steam, resulting in a slow decline in rates going into the 2017-2018 period of economic adjustment.

FRM rates are tied to the bond market and move in tandem with the 10-year Treasury Note (T-Note) rate. Investors have been placing large sums in bonds and on deposit with the Fed for safekeeping since investment opportunities are scarce. These excess funds have kept FRM rates low and steady, a spur to mortgage originations which increases home sales volume.

As of July 21, 2017, the 10-year T-Note rate is at 2.24%, down from the prior week. Lenders use the 10-year T-Note to determine a homebuyer’s FRM rate. The difference between the FRM note rate and the 10-year T-Note rate represents the lender’s risk premium, which accounts for potential losses due to foreclosures.

The current spread between the 10-year T-Note and 30-year FRM rate is now 1.63%, above the historical difference of 1.5%. However, the long-term trend shows the spread between the two rates has remained elevated and will likely continue to remain high, indicating high mortgage rates for homebuyers and refinancers. These overpriced mortgages — along with excessive home pricing— are contributing to the reduction in purchase-assist originations and the current slowdown in residential sales volume and construction starts.

As of June 2017, the average rate on adjustable rate mortgages (ARMs) decreased to 3.21%, far above its low point of 2.49% experienced in May 2013. ARM use has gradually risen over the past year due to home prices rising faster than the rate of pay, causing buyers to take on more risk to extend their purchasing power. The Fed’s recent short-term interest rate hikes have also pushed ARM rates up proportionately.

Looking forward, expect mortgage rates – and payments on consumer debt for cars and housing – to eventually experience upward pressure from the following proposed federal changes:

  • a net drop in tax revenue due to tax rate reductions and additional tax incentives to privatize government programs;
  • an increase in homebuyer demand for mortgages due to deregulation of mortgage lending;
  • a sharp rise in the employment rate, labor force participation and wages due to a congressional shift from fiscal austerity to stimulus through growth in infrastructure and military spending;
  • a raise in demand for capital from the bond market due to greatly increased federal and private borrowing spent on new long-term government programs; and
  • higher interest rates resulting from import tariffs that drive up the cost of goods and fuel inflation.

The first of these changes has been implemented recently through new tariffs on lumber imports from Canada, increasing the cost of lumber by up to 20%. As Canadian lumber composes around 30% of all lumber used in U.S. residential construction, the tariffs are expected to raise construction costs and will likely drive up home prices at least 2%.

Updated 07/21/2017. 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 07/21/17
2. 30-year FRM rate, monthly — Chart update 06/30/17
3. 15-year FRM rate — Chart update 07/21/17
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 06/30/17
5. 10-year Treasury note rate — Chart update 07/21/17
6. Combined FRM and 10-year Treasury note rates — Chart update 07/07/17
7. 91-day Treasury bill rate — Chart update 06/16/17
8. 3-month Treasury bill — Chart update 06/09/17
9. 6-month Treasury bill — Chart update 06/09/17
10. Treasury Securities average yield — Chart update 06/02/17
11. 12-month Treasury average — Chart update 06/09/17
12. Cost of Funds Index — Chart update 07/07/17
13. London Inter-Bank Offered rate (LIBOR) — Chart update 07/07/17
14. Applicable federal rates — Chart update 06/02/17
15. Private lender section 32 Reg-Z loans — Chart update 07/07/17

Average 30-Year Conventional Commitment Rate

Chart: 30-year FRM rate, weekly

Chart update 07/21/17

Current
07/21/17
3.87%

Month ago
06/23/17
3.80%
Year ago
07/22/16
3.54%
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 06/30/17
Jun 2017
Average
3.82%
May 2017
Average
3.89%
Jun 2016
Average
3.73%

Average 15-Year Conventional Commitment Rate

15yrfrm-072117
Chart update 07/21/17
Current
07/21/17
3.05%
Month ago
06/23/17
3.02%
Year ago
07/22/16
2.71%
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 06/30/17
Jun 2017
3.21%
May 2017
3.24%
Jun 2016
3.08%
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 07/21/17
Current
07/21/17
2.24%
Month ago
06/23/17
2.14%
Year ago
07/22/16
1.57%
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 07/07/17
Avg 15-Year
Jun 2017
3.02%
Avg 30-Year
Jun 2017
3.82%
Avg 10-Year T-Note
Jun 2017
2.19%
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

Chart update 06/16/17
Current
06/15/17
0.99%
Month Ago
05/18/17
0.91%
Year Ago
06/16/16
0.27%
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

Chart update 06/09/17
May 2017
0.89%
Apr 2017
0.80%
May 2016
0.27%
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

Chart update 06/09/17
 May 2017
1.02%
Apr 2017
0.93%
May 2016
0.41%

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

Chart update 06/02/17
May 2017
1.12%
Apr 2017
1.04%
May 2016
0.59%
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

Chart update 06/09/17
May 2017
0.78%
Apr 2017
0.73%
May 2016
0.47%
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 07/07/17
May 2017
0.65%
Apr 2017
0.65%
May 2016
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 07/07/17
1 Month
1.22%
6 Month
1.45%
1 Year
1.75%
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 06/02/17
Short (3 years or less)
May 2017
0.86%
Medium (3 to 9 years)
May 2017
1.51%
Long (9+ years)
May 2017
2.02%
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 07/07/17

Month* 6-Month 1-Year 2-Year 3-Year 5-Year 7-Year
Jun 2017 1.11% 1.20% 1.34% 1.49% 1.77% 2.01%
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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