The average 30-year fixed rate mortgage (FRM) rate remained level at 4.35% in the week ending February 15, 2019. The 15-year FRM rate decreased to 3.65%. FRM rates rose significantly in 2018, but have fallen back in recent weeks, currently about the same as a year earlier. The rising trend will continue over the long term, though interest rates have briefly flattened and may slip as we head into the coming recession, expected in 2020.
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, tending to move in tandem with the 10-year Treasury Note (T-Note) rate. Bond market investors are feeling discouraged in light of the slowing economy and instability emanating from the federal government. This has led them to accept lower yields in return for the safety of treasuries, which in turn has kept FRM rates down in recent weeks. FRM rates will not rise significantly over the next few years.
On the other hand, 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 is 1.68%, 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.
As of January 2019, the average monthly rate on ARMs decreased to 3.98%, still far above its low point of 2.49% experienced in May 2013 but still attractive in the face of rising FRM rates. 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 December 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 February 15, 2019. 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 02/15/19
2. 30-year FRM rate, monthly — Chart update 02/01/19
3. 15-year FRM rate — Chart update 02/15/19
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 02/01/19
5. 10-year Treasury note rate — Chart update 02/15/19
6. Combined FRM and 10-year Treasury note rates — Chart update 02/01/19
7. 91-day Treasury bill rate — Chart update 02/08/19
8. 3-month Treasury bill — Chart update 02/08/19
9. 6-month Treasury bill — Chart update 02/08/19
10. Treasury Securities average yield — Chart update 02/08/19
11. 12-month Treasury average — Chart update 02/08/19
12. Cost of Funds Index — Chart update 01/04/19
13. London Inter-Bank Offered rate (LIBOR) — Chart update 01/04/19
14. Applicable federal rates — Chart update 01/18/19
15. Private lender section 32 Reg-Z loans — Chart update 08/10/18
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| Chart update 02/15/19 |
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Current |
Month ago
01/18/19
4.37%
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Year ago
02/16/18
4.31%
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The average 30-year FRM rate in California is provided by Bankrate.com.
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| Chart update 02/01/19 | ||
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Jan 2019
Average
4.43%
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Dec 2018
Average
4.55%
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Jan 2018
Average
3.97%
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| Chart update 02/15/19 | ||
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Current
02/15/19
3.65%
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Month ago
01/18/19
3.70%
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Year ago
02/16/18
3.65%
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The average 15-year FRM rate in California is provided by Bankrate.com.
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| Chart update 02/01/19 | ||
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Jan 2019
3.98%
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Dec 2018
4.01%
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Jan 2018
3.79%
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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.
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| Chart update 02/15/19 |
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Current
02/15/19
2.67%
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Month ago
01/18/19
2.79%
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Year ago
02/16/18
2.87%
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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.
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| Chart update 02/01/19 |
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Avg 15-Year
Jan 2019
3.70%
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Avg 30-Year
Jan 2019
4.43%
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Avg 10-Year T-Note
Jan 2019
2.71%
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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.
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| Chart update 02/08/19 |
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Current
02/07/19
2.43%
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Month Ago
01/10/18
2.46%
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Year Ago
02/08/18
1.50%
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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.
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| Chart update 02/08/19 |
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Jan 2019
2.37%
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Dec 2018
2.37%
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Jan 2018
1.41%
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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.
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| Chart update 02/08/19 |
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Jan 2019
2.45%
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Dec 2018
2.48%
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Jan 2018
1.59%
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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. |
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| Chart update 02/08/19 | ||
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Jan 2019
2.58%
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Dec 2018
2.66%
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Jan 2018
1.80%
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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.
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| Chart update 02/08/19 |
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Jan 2019
2.40%
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Dec 2018
2.33%
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Jan 2018
1.28%
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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.
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| Chart update 01/04/19 | ||
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Nov 2018
1.06%
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Oct 2018
1.08%
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Nov 2017
0.74%
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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.
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| Chart update 01/04/19 | ||
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1 Month
2.50%
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6 Month
2.88%
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1 Year
3.01%
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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.
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| Chart update 01/18/19 |
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Short (3 years or less)
Jan 2019
2.04%
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Medium (3 to 9 years)
Jan 2019
2.17%
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Long (9+ years)
Jan 2019
2.37%
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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.
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| 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% |
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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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Interest rates will remain relatively low for MANY years to come. The United States has such a large amount of debt that a significant increase in interest rates would leave the US government unable to make the payments on our debt. Defaulting on the deficit is not an option. Therefore rates will remain low.
Jeff Gundlach (the new bond king) says otherwise. IMO we will see 6% rates on 30yr mortgages in the next few years. The national economy is spiking now since money is still cheap to borrow but rates ARE going up so it makes sense to do some things now with cheaper money. Overbuilding due to speculation is a constant theme in our economy and recessions do happen. IMO mid 2019 will be the start of our next recession and the question is how shallow or severe it will be. To soon to tell due to to many factors, trade war, election results, foreign entities buying USA debt (or not).
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Very useful and concise information. It really tells the story very well.
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!
Excellent Set of GRAPHS 4 THE PUBLIC! 2 BAD THEY CAN’T UNDERSTAND IT UNLESS THEY HAVE A BUSINESS DEGREE LIKE ME!
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.
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.
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.
ditto
Concise information, clearly explained. Good stuff!
Still more good news”
helpful Synopsis
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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.
Thank you for all of the great info and data each month!
Hi ,
This is a very helpful analysis. Keep it up monthly for those that are serious about following ARMs.