The average 30-year fixed rate mortgage (FRM) rate increased to 3.60% in the week ending January 21, 2021. The average 15-year FRM rate also increased to 2.80%.
In 2021, FRM rates have slowly risen from historic lows reached during the 2020 recession/pandemic and will continue to move upward heading into 2022 as the Federal Reserve (the Fed) cuts back its purchase of mortgage backed bonds (MBBs), a policy which set rates to encourage a significant increase in mortgage borrowing.
In contrast to the Fed policy, non-government investors in the MBB market demand higher yields than the Fed maintained purchasing MBBs during the pandemic. For a seamless transition of mortgage rates up to levels the bond market will support by purchasing MBBs in the future, the Fed’s actions in 2022 will gradually adjust rates as they taper their purchases of what are essentially home mortgages.
Fundamentally, the setting of FRM rates is tied to the bond market, moving in tandem with the 10-year Treasury Note (T-Note) rate. Historically, the spread between the 10-yr T-Note rate for setting the FRM rate is a premium of 1.5%.
The 10-yr T-Note rate is 1.76% as of January 21, 2021. However, the spread between the 10-year T-Note and 30-year FRM rate is 1.84%, a greater premium than the historical rate spread of 1.5% the Fed maintained during the recession. Combined, current mortgage rate pressures reduce the amount of money a homebuyer can borrow without huge pay raises.
The average monthly rate on ARMs has recently increased, averaging 3.10% in December 2021. In a crossover, the 30-year FRM rate rose above the average ARM rate in February 2021, making these riskier mortgage products more appealing to homebuyers seeking to increase their borrowing capacity. This inversion will inch ARM use higher.
To further disrupt the now-ending pandemic home sales market, the government in September 2021 ended their injection of cash which stimulated consumer spending by stabilizing personal income in the face of 2020’s historic job losses. At the same time, foreclosure and eviction moratoriums which maintained the status quo in home occupancies came to an end.
California is still 710,000 jobs below the pre-recession December 2019 peak as of November 2021. While lost income from lost jobs normally results in reduced sales volume and prices as in a recession, reduced sales value and pricing did not happen during the pandemic. What prevented recession conditions from enduring in the housing market were the concurrence of historically low home inventory for sale, an unparalleled mortgage interest rate reduction, massive cash disbursements to consumers, and foreclosure and eviction moratoriums. As these events collectively reverse course in 2022, expect to see downward pressure on home sales — and eventually prices — through 2023-2024.
Updated January 21, 2022. 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 01/21/22
2. 30-year FRM rate, monthly — Chart update 01/07/22
3. 15-year FRM rate — Chart update 01/21/22
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 01/07/22
5. 10-year Treasury note rate — Chart update 01/21/22
6. Combined FRM and 10-year Treasury note rates — Chart update 01/07/22
7. 91-day Treasury bill rate — Chart update 01/07/22
8. 3-month Treasury bill — Chart update 01/07/22
9. 6-month Treasury bill — Chart update 01/07/22
10. Treasury Securities average yield — Chart update 01/14/21
11. 12-month Treasury average — Chart update 01/07/22
12. Cost of Funds Index — Chart update 01/14/21
13. London Inter-Bank Offered rate (LIBOR) — Chart update 01/14/21
14. Secured Overnight Financing Rate (SOFR) — Chart update 01/21/22
15. Applicable federal rates — Chart update 01/21/22
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| Chart update 01/21/22 | ||
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Current |
Month ago
12/24/21
3.05%
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Year ago
01/22/21
2.77%
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The average 30-year FRM rate in California is provided by Bankrate.com.
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| Chart update 01/07/22 | ||
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Dec 2021
Average
3.10%
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Nov 2021
Average
3.07%
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Dec 2020
Average
2.70%
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| Chart update 01/21/22 | ||
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Current
01/21/22
2.80%
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Month ago
12/24/21
2.30%
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Year ago
1/22/21
2.21%
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The average 15-year FRM rate in California is provided by Bankrate.com.
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| Chart update 01/07/22 | ||
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Dec 2021
2.43%
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Nov 2021
2.36%
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Dec 2020
2.79%
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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 01/21/22 |
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Current
01/21/22
1.76%
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Month ago
12/24/21
1.50%
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Year ago
01/22/21
1.09%
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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 01/07/22 |
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Avg 15-Year
Dec 2021
2.35%
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Avg 30-Year
Dec 2021
3.10%
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Avg 10-Year T-Note
Dec 2021
1.50%
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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 01/07/22 |
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Current
01/07/22
0.09%
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Month Ago
12/10/21
0.06%
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Year Ago
01/08/21
0.09%
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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 01/07/22 |
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Dec 2021
0.06%
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Nov 2021
0.05%
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Dec 2020
0.09%
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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 01/07/22 |
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Dec 2021
0.02%
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Nov 2021
0.07%
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Dec 2020
0.10%
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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 1/14/21 | ||
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Dec 2021
0.30%
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Nov 2021
0.18%
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Dec 2020
0.10%
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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 01/07/21 |
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Dec 2021
0.10%
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Nov 2021
0.09%
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Dec 2020
0.38%
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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 1/14/22 | ||
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Nov 2021
0.22%
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Oct 2021
0.23%
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Nov 2020
0.47%
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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 01/21/22 | ||
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01/21/22
0.04%
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12/24/21
0.05%
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01/22/21
0.07%
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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 01/14/21 | ||
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1-Month
0.11%
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6-Month
0.39%
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1-Year
0.77%
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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 01/01/22 |
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Short (3 years or less)
Feb 2022
0.11%
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Medium (3 to 9 years)
Feb 2022
0.96%
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Long (9+ years)
Feb 2022
1.45%
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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!