The average 30-year fixed rate mortgage (FRM) rate decreased in the week ending July 23, 2021 to 2.78%. The average 15-year FRM rate also fell back, now at 2.12%. FRM rates recently rose from the record lows reached through the Federal Reserve’s (the Fed’s) efforts to stimulate lending during the ongoing recession. Beginning in March 2020, the Fed dropped their benchmark interest rate to zero and began purchasing mortgage-backed securities (MBS), fulfilling their role as the lender of last resort to ensure mortgage originations continued during the recession.
The Fed intends to keep their benchmark interest rate near zero through at least 2023, but mortgage rates have risen from the historic lows of 2020 as bond market investors show more interest in riskier, but potentially more profitable non-government investment opportunities. Also of note, the government’s continued stimulus injections have propped up the economy despite 2020’s historic job losses, 1.4 million of which have yet to be regained here in California in mid-2021. The housing market’s performance in 2021-2022 will very much depend on the amount and duration of further government intervention, including stimulus, extensions of the foreclosure moratorium and any future job creation programs.
FRM rates are closely 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, but has since bounced back, at 1.29% as of July 23, 2021. In 2020, the expectation of a decline in business activity led bond market investors to seek the safety of Treasuries, accepting significantly lower yields in return for the safety of treasuries, which in turn pulled down FRM rates. Now, the only player to keep interest rates near the historic lows of 2020 will be the Fed, which may accomplish this task by amping up its MBS purchases.
The spread between the 10-year T-Note and 30-year FRM rate is 1.49% as of July 23, 2021, level with the historical difference of 1.5%. The higher margins seen through much of 2018-2020 signify that mortgage lenders had been padding their risk premiums on top of restricting mortgage credit. This spread has since shrunk, indicating lenders are unable to drop their mortgage rates further without further Fed intervention.
The average monthly rate on ARMs decreased to 2.54% in June 2021, just above its low point of 2.49% experienced in May 2013. While recent months have seen the average ARM rate consistently higher than the average 30-year FRM rate, the 30-year FRM rate rose above the average ARM rate beginning in February, making these riskier mortgage products more appealing. Therefore, ARM use will inch higher, even as the Fed works to keep interest rates on FRMs low.
The effects of the 2020 recession, along with the global pandemic, continue to impact the housing market. Lost jobs decrease the willingness to take on large purchases, and California is still 1.4 million jobs below the pre-recession peak as of May 2021. While job losses typically result in reduced sales volume and prices, today’s low mortgage interest rates, along with historically low inventory, have helped inflate home prices. However, once the federal foreclosure moratorium ends at the end of July 2021, distressed sales will hit the market, putting downward pressure on home sales and prices.
Updated July 23, 2021. 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 07/23/21
2. 30-year FRM rate, monthly — Chart update 07/02/21
3. 15-year FRM rate — Chart update 07/23/21
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 07/02/21
5. 10-year Treasury note rate — Chart update 07/23/21
6. Combined FRM and 10-year Treasury note rates — Chart update 07/02/21
7. 91-day Treasury bill rate — Chart update 07/16/21
8. 3-month Treasury bill — Chart update 07/09/21
9. 6-month Treasury bill — Chart update 07/09/21
10. Treasury Securities average yield — Chart update 07/23/21
11. 12-month Treasury average — Chart update 07/09/21
12. Cost of Funds Index — Chart update 07/23/21
13. London Inter-Bank Offered rate (LIBOR) — Chart update 07/09/21
14. Secured Overnight Financing Rate (SOFR) — Chart update 07/23/21
15. Applicable federal rates — Chart update 07/09/21
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| Chart update 07/23/21 | ||
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Current |
Month ago
06/25/21
3.02%
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Year ago
07/24/20
3.01%
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The average 30-year FRM rate in California is provided by Bankrate.com.
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| Chart update 07/02/21 | ||
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Jun 2021
Average
2.98%
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May 2021
Average
2.96%
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Jun 2020
Average
3.14%
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| Chart update 07/23/21 | ||
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Current
07/23/21
2.12%
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Month ago
06/25/21
2.34%
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Year ago
07/24/20
2.54%
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The average 15-year FRM rate in California is provided by Bankrate.com.
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| Chart update 07/02/21 | ||
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Jun 2021
2.54%
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May 2021
2.62%
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Jun 2020
3.06%
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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 07/23/21 |
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Current
07/23/21
1.29%
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Month ago
06/25/21
1.51%
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Year ago
07/24/20
0.59%
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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 07/02/21 |
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Avg 15-Year
Jun 2021
2.27%
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Avg 30-Year
Jun 2021
2.98%
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Avg 10-Year T-Note
Jun 2021
1.52%
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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 07/16/21 |
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Current
07/15/21
0.05%
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Month Ago
06/17/21
0.04%
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Year Ago
07/16/20
0.15%
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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 07/09/21 |
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Jun 2021
0.04%
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May 2021
0.02%
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Jun 2020
0.16%
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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 07/09/21 |
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Jun 2021
0.05%
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May 2021
0.04%
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Jun 2020
0.18%
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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 07/23/21 | ||
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Jun 2021
0.07%
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May 2021
0.05%
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Jun 2020
0.18%
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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 07/09/21 |
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Jun 2021
0.10%
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May 2021
0.11%
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Jun 2020
1.17%
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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 07/23/21 | ||
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May 2021
0.31%
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Apr 2021
0.34%
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May 2020
0.76%
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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 07/23/21 | ||
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07/22/21
0.05%
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06/18/21
0.05%
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07/24/20
0.10%
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This index is one of several indices used by lenders as stated in their ARM note to periodically adjust the note’s interest rate. It is taking over the LIBOR in 2021, which was found to be manipulated in the years leading up to the 2008 recession and financial crisis. The ARM interest rate equals the SOFR rate plus the lender’s profit margin. The rate is based on overnight borrowing in the U.S. Treasury repo market. The SOFR is produced in a transparent manner and is based on observable transactions, rather than models, and, unlike the LIBOR, is not dependent on bank estimates.
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| Chart update 07/16/21 | ||
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1-Month
0.09%
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6-Month
0.15%
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1-Year
0.24%
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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 07/16/21 |
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Short (3 years or less)
Aug 2021
0.14%
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Medium (3 to 9 years)
Aug 2021
0.76%
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Long (9+ years)
Aug 2021
1.43%
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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, reported for the coming month.
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Lots of charts and graphs with little meaning beyond that rates are and have been historically low . They provide Zero proof that a recession is imminent. Even the time frame is incorrect for predictive analysis. News Flash: CA is not the canary in the coal mine for the US Economy. Your problems there are unique to CA and how it has been mismanaged for decades.
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).
Thank you. I love this article. Complex issues presented with clarity..
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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.
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!