Current market rates

The average 30-year fixed rate mortgage (FRM) rate increased slightly to 3.53% during the week ending August 26, 2016. The 15-year FRM rate also increased slightly to 2.69%.

FRM rates have remained relatively low during the recovery from the Great Recession due to near-zero short-term borrowing rates set by the Federal Reserve (the Fed). The Fed raised the short-term rate by 0.25% on December 17, 2015 following seven years at essentially zero.

However, FRM rates will not see the ripple effects of the rate hike until 2017. In the meantime, FRM rates will continue to remain low due to the present lack of investment opportunities for the excess sums now placed in bonds and on deposit with the Fed. 

Interest rates will likely stay low for several months, though movement will depend on the next direction of the global economy. A strengthening bond market due to a slowing global economy will keep interest rates and mortgage rates down.

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, FRM rates following in tandem. As of August 26, 2016, the 10-year T-Note rate is at 1.63%, up 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. The risks are the potential losses due to mortgage defaults on less than 20% down payment transactions, covered by private mortgage insurance (PMI).

The spread between the 10-year T-Note and 30-year FRM rate dropped to 1.90%, still above the historical difference of 1.5%. The elevated spread indicates lenders are overcharging homebuyers for mortgages to profit from excessive risk premiums. These overpriced mortgages – along with the deceleration in home sales volume since October 2015 due to excessive home pricing – are contributing to the reduction in purchase-assist originations and, as a result, the current slowdown in residential construction, putting a damper on real estate sales volume. 

As of August 2016, the average rate on adjustable rate mortgages (ARMs) fell to 2.92%, above its low point of 2.49% experienced in May 2013. ARM use has gradually risen due to home prices rising faster than the rate of pay, causing buyers to take on more risk to extend their purchasing powerThe Fed’s short-term interest rate hike at the end of 2015 caused ARM rates to rise proportionately – around 0.25% – and they will further rise when the Fed again raises rates. 

Updated 08/26/2016. 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 08/26/16
2. 30-year FRM rate, monthly — Chart update 08/26/16
3. 15-year FRM rate — Chart update 08/26/16
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 08/26/16
5. 10-year Treasury note rate — Chart update 08/26/16
6. Combined FRM and 10-year Treasury note rates — Chart update 08/05/16
7. 91-day Treasury bill rate — Chart update 08/26/16
8. 3-month Treasury bill — Chart update 08/12/16
9. 6-month Treasury bill — Chart update 08/12/16
10. Treasury Securities average yield — Chart update 08/05/16
11. 12-month Treasury average — Chart update 08/12/16
12. Cost of Funds Index — Chart update 08/26/16
13. London Inter-Bank Offered rate (LIBOR) — Chart update 08/26/16
16. Applicable federal rates — Chart update 08/26/16
17. Private lender section 32 Reg-Z loans — Chart update 08/05/16

Average 30-Year Conventional Commitment Rate

Chart update 08/26/16

Current
08/26/16
3.53%

Month ago
07/29/16
3.53%
Year ago
08/27/15
3.78%
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 update 08/26/16
Aug 2016
Average
3.52%
Jul 2016
Average
3.59%
Aug 2015
Average
3.86%

Average 15-Year Conventional Commitment Rate

Chart update 08/26/16
Current
08/26/16
2.69%
Month ago
07/29/16
2.72%
Year ago
08/27/15
3.02%
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 update 08/26/16
Aug 2016
2.92%
Jul 2016
3.08%
Aug 2015
2.82%
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 update 08/26/16
Current
08/26/16
1.63%
Month ago
07/29/16
1.45%
Year ago
08/27/15
2.19%
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: 15- and 30- year FRM Rates vs. 10-year Treasury Note Rate

Chart update 08/05/16
Avg 15-Year
Jul 2016
2.72%
Avg 30-Year
Jul 2016
3.59%
Avg 10-Year T-Note
Jul 2016
1.50%
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

Chart update 08/26/16
Current
08/25/16
0.31%
Month Ago
07/28/16
0.32%
Year Ago
08/27/15
0.05%
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 Rate

Chart update 08/12/16
Jul 2016
0.30%
Jun 2016
0.27%
Jul 2015
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 08/12/16
Jul 2016
0.39%
Jun 2016
0.40%
Jul 2015
0.12%

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 08/05/16
Jul 2016
0.51%
Jun 2016
0.55%
Jul 2015
0.30%
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 08/12/16
Jul 2016
0.51%
Jun 2016
0.49%
Jul 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. 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 update 08/26/16
Jul 2016
0.69%
Jun 2016
0.69%
Jul 2015
0.66%
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 update 08/26/16
1 Month
0.52%
6 Month
1.23%
1 Year
1.52%
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 Federate Rates

Chart update 08/26/16
Short (3 years or less)
Aug 2016
0.56%
Medium (3 to 9 years)
Aug 2016
1.03%
Long (9+ years)
Aug 2016
1.80%
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 08/05/16

Month* 6-Month 1-Year 2-Year 3-Year 5-Year 7-Year
July 2016 0.40% 0.51% 0.67% 0.79% 1.07% 1.33%
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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16 Comments

  1. Terry Herrera said:

    KISS – Keep it Simple & Stupid. Before, I sell almost everything: pots & pans, Insurance: property & Casualty; life & disability. All kinds of licenses; broker & agent licenses, even dog’s & cat’s license, I let them expired. Are we trying to be expert on extraneous matters of limited application; or to concentrate on practical & substantive issues of social engineering, better understanding, & dedicated service to clients? Let computer-brain-knowledge be ready for, far & between instant use, when needed. But, emphasis should be on KISS. After all, we are only salesmen; although, treated as professionals.

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  3. Donald Rubin said:

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

  4. 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!

  5. BigIrr said:

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

  6. 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.

  7. 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.

  8. 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.

  9. 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.

  10. 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.

  11. 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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