The average 30-year fixed rate mortgage (FRM) rate decreased slightly in the week ending July 31, 2020, now at 2.99%. The 15-year FRM rate also decreased to 2.51%. FRM rates have descended to historic lows due to efforts to stimulate lending during today’s unstable economic times. Beginning in March, the Federal Reserve (the Fed) dropped their benchmark interest rate to zero and began purchasing mortgage-backed securities, fulfilling their role as the lender of last resort to ensure mortgage originations continue. As a result, interest rates will continue their gradual decline over the next several months.

FRM rates are also tied to the bond market, tending to move in tandem with the 10-year Treasury Note (T-Note) rate. The 10-year T-Note recently plunged to its lowest rate on record, at 0.54% as of July 31, 2020. Bond market investors are reacting to the gutted economy and the expectation of a continued halt to many business activities. This has led them to accept significantly lower yields in return for the safety of treasuries, which in turn has pulled FRM rates down in recent weeks. FRM rates will remain low over the next two-to-three years.

The spread between the 10-year T-Note and 30-year FRM rate is 2.45%, well above the historical difference of 1.5%. The higher margins seen through much of 2018-2019 and rising in 2020 signify that mortgage lenders are padding their risk premiums on top of restricting mortgage credit. Now, the only player able to move FRM rates lower is the Fed, which may be accomplished by a combination of the Fed “going negative” and the extreme purchase of mortgage backed securities (MBS) the Fed is currently undertaking. 

The average monthly rate on ARMs was 2.94% in July 2020, still above its low point of 2.49% experienced in May 2013. The average ARM rate is just below the average 30-year FRM rate, making these riskier mortgage products less appealing. Therefore, ARM use will remain low over the next couple of years, as the Fed will work to keep interest rates on FRMs low. At the end of March, yields on short-term treasury bills went negative, indicating a strong expectation that the Fed will also go negative this year, which will translate to even lower mortgage interest rates. 

The economic slowdown that began in 2019 is accelerating downward in 2020. Social distancing orders have caused economic activity to spiral, resulting in lost jobs and less willingness to take on large purchases. Many homebuyers and sellers are hitting pause on their plans and today’s low FRM and ARM rates won’t be enough to stem the outgoing tide. Expect home sales volume to continue down in the months ahead, reversing course once the recovery is underway, not to even begin until 2022-2023.

Updated July 31, 2020. 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 07/31/20
2. 30-year FRM rate, monthly — Chart update 07/31/20
3. 15-year FRM rate — Chart update 07/31/20
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 07/31/20
5. 10-year Treasury note rate — Chart update 07/31/20
6. Combined FRM and 10-year Treasury note rates — Chart update 07/31/20
7. 91-day Treasury bill rate — Chart update 07/17/20
8. 3-month Treasury bill — Chart update 07/10/20
9. 6-month Treasury bill — Chart update 07/10/20
10. Treasury Securities average yield — Chart update 02/21/20
11. 12-month Treasury average — Chart update 07/10/20
12. Cost of Funds Index — Chart update 07/24/20
13. London Inter-Bank Offered rate (LIBOR) — Chart update 07/17/20
14. Applicable federal rates — Chart update 07/24/20
15. Private lender section 32 Reg-Z loans — Chart update 08/10/18

Chart update 07/31/20

Current
07/31/20
2.99%

Month ago
07/02/20
3.07%
Year ago
08/01/19
3.75%
The average 30-year FRM rate in California is provided by Bankrate.com.

Chart update 07/31/20
Jul 2020
Average
3.00%
Jun 2020
Average
3.14%
Jul 2019
Average
3.80%
 
 
Chart update 07/31/20
Current
07/31/20
2.51%
Month ago
07/02/20
2.56%
Year ago
08/01/19
3.20%
The average 15-year FRM rate in California is provided by Bankrate.com.
More information:

 
Chart update 07/31/20
Jul 2020
2.94%
Jun 2020
3.06%
Jul 2019
3.48%
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 07/31/20
Current
07/31/20
0.54%
Month ago
07/02/20
0.67%
Year ago
08/02/19
1.88%
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 07/31/20
Avg 15-Year
Jul 2020
2.51%
Avg 30-Year
Jul 2020
3.00%
Avg 10-Year T-Note
Jul 2020
0.61%
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 07/17/20
Current
07/16/20
0.15%
Month Ago
06/18/20
0.16%
Year Ago
07/18/19
2.09%
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 07/10/20
Jun 2020
0.16%
May 2020
0.13%
Jun 2019
2.17%
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 07/10/20
 Jun 2020
0.18%
May 2020
0.15%
Jun 2019
2.11%

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.

Chart update 02/21/20
Jan 2019
1.53%
Dec 2019
1.55%
Jan 2018
2.58%
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 07/10/20
Jun 2020
1.17%
May 2020
1.32%
Jun 2019
2.48%
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 07/24/20
May 2019
0.76%
Apr 2020
0.74%
May 2019
1.14%
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 07/19/20
1-Month
0.18%
6-Month
0.34%
1-Year
0.48%
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 07/24/20
Short (3 years or less)
Aug 2020
0.13%
Medium (3 to 9 years)
Aug 2020
0.31%
Long (9+ years)
Aug 2020
0.85%
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, reported for the coming month.