The average 30-year fixed rate mortgage (FRM) rate dipped to 4.58% in the week ending December 7, 2018. The 15-year FRM rate also decreased to 3.94%. FRM rates have risen slowly but consistently since mid-2017. This trend will continue over the long term, though interest rates may briefly flatten and slip as we head into the coming recession, expected in 2020. 

FRM rates are up nearly a full percentage point from a year prior. For a $500,000 mortgage, that results in a 12% increase in monthly mortgage payment amounts. Comparatively, wages have shown an annual increase of only 3%, according to the most recent data. Rising interest rates have discouraged homebuyers and decreased their purchasing power, causing sales volume and prices to slip going into 2019. The downward trajectory for prices and sales volume will continue well into 2019, not to recover until after the next recession is over, in 2021-2023.

FRM rates are tied to the bond market, moving in tandem with the 10-year Treasury Note (T-Note) rate. Since excess funds held by the wealthy are flowing into the bond market — due to a scarcity of long-term investment opportunities, a dearth of business starts, a weakening demand for mortgages and federal revenue deficits and trade chaos — FRM rates will not rise significantly over the next few years.

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 spread between the 10-year T-Note and 30-year FRM rate has increased to 1.7%, well above the historical difference of 1.5%. This wide margin signifies that mortgage lenders, uncertain of the market’s future, are padding their risk premiums.

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 driving home sales for brokers and builders.

As of November 2018, the average monthly rate on ARMs decreased slightly to 4.21%, 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 ARMs more costly and less attractive. The Fed recently increased the short-term interest rate in September 2018 and will likely increase rates once more before the end of 2018, which will drive up the ARM rate.

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 December 7, 2018. Original copy released March 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 12/07/18
2. 30-year FRM rate, monthly — Chart update 11/30/18
3. 15-year FRM rate — Chart update 12/07/18
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 11/02/18
5. 10-year Treasury note rate — Chart update 12/07/18
6. Combined FRM and 10-year Treasury note rates — Chart update 11/30/18
7. 91-day Treasury bill rate — Chart update 11/30/18
8. 3-month Treasury bill — Chart update 10/12/18
9. 6-month Treasury bill — Chart update 10/12/18
10. Treasury Securities average yield — Chart update 10/12/18
11. 12-month Treasury average — Chart update 10/12/18
12. Cost of Funds Index — Chart update 10/12/18
13. London Inter-Bank Offered rate (LIBOR) — Chart update 10/12/18
14. Applicable federal rates — Chart update 10/12/18
15. Private lender section 32 Reg-Z loans — Chart update 08/10/18


Chart update 12/07/18

Current
12/07/18
4.58%

Month ago
11/09/18
4.80%
Year ago
12/08/17
3.83%
The average 30-year FRM rate in California is provided by Bankrate.com.

Chart update 11/30/18
Nov 2018
Average
4.74%
Oct 2018
Average
4.70%
Nov 2017
Average
3.82%
 
 

Chart update 12/07/18
Current
12/07/18
3.94%
Month ago
11/09/18
4.08%
Year ago
12/08/17
3.15%
The average 15-year FRM rate in California is provided by Bankrate.com.
More information:

 
Chart update 11/30/18
Nov 2018
4.21%
Oct 2018
4.30%
Nov 2017
3.35%
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.

Chart update 12/07/18
Current
11/30/18
2.88%
Month ago
11/09/18
3.18%
Year ago
12/08/17
2.38%
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.
 
 

Chart update 11/30/18
Avg 15-Year
Nov 2018
4.01%
Avg 30-Year
Nov 2018
4.74%
Avg 10-Year T-Note
Nov 2018
3.11%
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:

Chart update 11/30/18
Current
11/30/18
2.417%
Month Ago
11/01/18
2.351%
Year Ago
11/30/17
1.285%
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.

Chart update 10/12/18
Sep 2018
2.13%
Aug 2018
2.03%
Sep 2017
1.03%
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.

Chart update 10/12/18
 Sep 2018
2.29%
Aug 2018
2.19%
Sep 2017
1.15%

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.

Chart update 08/03/18
Sep 2018
2.56%
Aug 2018
2.45%
Sep 2017
1.28%
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.

Chart update 10/12/18
Sep 2018
2.05%
Aug 2018
1.95%
Sep 2017
1.00%
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.

Chart update 08/24/18
Sep 2018
1.02%
Aug 2018
1.02%
Jul 2017
0.7%
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.

Chart update 10/12/18
1 Month
2.42%
6 Month
2.63%
1 Year
2.96%
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.

Chart update 10/12/18
Short (3 years or less)
Oct 2018
1.91%
Medium (3 to 9 years)
Oct 2018
2.12%
Long (9+ years)
Oct 2018
2.25%
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 08/10/18

Month* 6-Month 1-Year 2-Year 3-Year 5-Year 7-Year
Jul 2018 2.17% 2.39% 2.61% 2.70% 2.78% 2.85%
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 RPI Form 223-1: Points and Fees Test and Form 223: Supplemental Truth-in-Lending Section 32 Disclosure]
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