The average 30-year fixed rate mortgage (FRM) rate jumped in the week ending January 15, 2021 to 2.79%. The average 15-year FRM rate also rose from historic lows to 2.23%. FRM rates recently descended to record lows due to efforts to stimulate lending during today’s recession. Beginning in March 2020, the Federal Reserve (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 continue.

The Fed recently announced their intention to keep their benchmark interest rate near zero through at least 2023, but mortgage rates have begun to increase as bond market investors show more interest in riskier, non-government investment opportunities.

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, bouncing back to 1.10% as of January 15, 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 inched higher to 1.69%, just above the historical difference of 1.5%. The higher margins seen through much of 2018-2020 signify that mortgage lenders have been padding their risk premiums on top of restricting mortgage credit.

The average monthly rate on ARMs decreased to 2.77% in December 2020, still above its low point of 2.49% experienced in May 2013. The average ARM rate remains higher than 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. 

The 2020 recession, along with the impacts from the global pandemic, are being felt in the housing market. Social distancing has 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 while today’s low mortgage interest rates have thus far supported home prices, they aren’t enough to support transactional volume. Expect home sales volume reports to end the year below 2019, reversing course once a consistent recovery is underway, likely around 2022-2023.

Updated January 15, 2021. Original copy released March 2012.

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1. 30-year fixed rate mortgage (FRM) rate, weekly — Chart update 01/15/21
2. 30-year FRM rate, monthly — Chart update 01/01/21
3. 15-year FRM rate — Chart update 01/15/21
4. 5/1 adjustable rate mortgage (ARM) rate — Chart update 01/01/21
5. 10-year Treasury note rate — Chart update 01/15/21
6. Combined FRM and 10-year Treasury note rates — Chart update 01/01/21
7. 91-day Treasury bill rate — Chart update 01/15/21
8. 3-month Treasury bill — Chart update 01/08/21
9. 6-month Treasury bill — Chart update 01/08/21
10. Treasury Securities average yield — Chart update 12/18/20
11. 12-month Treasury average — Chart update 01/08/21
12. Cost of Funds Index — Chart update 12/18/20
13. London Inter-Bank Offered rate (LIBOR) — Chart update 01/15/21
14. Applicable federal rates — Chart update 01/15/21

Chart update 01/15/21

Current
01/15/21
2.79%

Month ago
12/18/20
2.67%
Year ago
01/17/20
3.65%
The average 30-year FRM rate in California is provided by Bankrate.com.

Chart update 01/01/21
Dec 2020
Average
2.68%
Nov 2020
Average
2.77%
Dec 2019
Average
3.70%
 
 
Chart update 01/15/21
Current
01/15/21
2.23%
Month ago
12/18/20
2.21%
Year ago
01/17/20
3.09%
The average 15-year FRM rate in California is provided by Bankrate.com.
More information:

 
Chart update 01/01/21
Dec 2020
2.77%
Nov 2020
3.00%
Dec 2019
3.39%
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 01/15/21
Current
01/15/21
1.10%
Month ago
12/18/20
0.93%
Year ago
01/17/20
1.83%
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 01/01/21
Avg 15-Year
Dec 2020
2.22%
Avg 30-Year
Dec 2020
2.68%
Avg 10-Year T-Note
Dec 2020
0.93%
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 01/15/21
Current
01/14/21
0.09%
Month Ago
12/17/20
0.08%
Year Ago
01/16/20
1.56%
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 01/08/21
Dec 2020
0.09%
Nov 2020
0.09%
Dec 2019
1.54%
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 01/08/21
 Dec 2020
0.09%
Nov 2020
0.10%
Nov 2019
1.54%

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 12/18/20
Nov 2020
0.12%
Oct 2020
0.13%
Nov 2019
1.57%
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 01/o8/21
Dec 2020
0.38%
Nov 2020
0.50%
Dec 2019
2.05%
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 11/20/20
Oct 2020
0.50%
Sep 2020
0.52%
Oct 2019
1.10%
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 01/15/21
1-Month
0.13%
6-Month
0.25%
1-Year
0.33%
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 01/15/21
Short (3 years or less)
Jan 2021
0.11%
Medium (3 to 9 years)
Jan 2021
0.39%
Long (9+ years)
Jan 2021
1.03%
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.