Boston Homes
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Mortgage rates mixed this week

BY ADRIAN D. GARCIA
BANKRATE.COM

 

Mortgage rates diverged this week, but one key rate receded. The average for a 30-year fixed-rate mortgage fell, but the average rate on a 15- year fixed increased. On the variable-mortgage side, the average rate on 5/1 adjustable-rate mortgages held firm.

 

Mortgage rates are constantly changing, but they continue to represent a bargain compared to rates before the Great Recession. If you’re in the market for a mortgage, it may make sense to go ahead and lock if you see a rate you like. Just don’t do so without shopping around first.

 

The average rate you’ll pay for a 30-year fixed mortgage is 4.33 percent, down 5 basis points over the last seven days. A month ago, the average rate on a 30-year fixed mortgage was higher, at 4.53 percent.

 

At the current average rate, you’ll pay $496.63 per month in principal and interest for every $100,000 you borrow. That’s a decline of $2.95 from last week.

 

The average 15-year fixed-mortgage rate is 3.68 percent, up 2 basis points from a week ago.

 

Monthly payments on a 15-year fixed mortgage at that rate will cost around $724 per $100,000 borrowed. That’s obviously much higher than the monthly payment would be on a 30-year mortgage at that rate, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more rapidly.

 

The average rate on a 5/1 ARM is 4.03 percent, unchanged from a week ago.

 

These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.

 

Monthly payments on a 5/1 ARM at 4.03 percent would cost about $479 for each $100,000 borrowed over the initial five years, but could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.

 

Greg McBride, senior vice president and chief financial analyst at Bankrate.com, said, “If the Fed minutes reveal internal disagreement between raising rates or holding steady, we’ll likely see bond yields and mortgage rates move up. If hopes that the Fed is on the sidelines for the remainder of the year are underscored, then rates will fall further.”

 

Logan Mohtashami, a senior loan officer at AMC Lending Group, believes rates will go down. He said, “Normally, I would say unchanged because we have been in this range on the 10-year yield for some time and, no matter what happens with China, oil, Fed or the economic data, we can’t break this range between 2.55 percent and 2.82 percent. However, I am going to say lower yields from this 2.65 percent 10-year yield print today because the stock market is at a key technical level and, if we can’t break over 2,800 on the S&P 500, you might see a rotation into bonds just for a week. We need to see a close below 2.55 percent and next-day bond buying for rates to drop.”

 

But most experts believe rates will hold steady. Michael Becker, a branch manager at Sierra Pacific Mortgage, said, “Over the last few weeks, the 10-year Treasury note has been in a consolidating pattern with yields trading in an ever tighter range. Mortgage rates follow the 10-year Treasury and have similarly been consolidating with small differences in rates on a day to day and week to week basis.

 

“At some point, rates will break out of this tight range and we will see either a spike or drop in rates. If global economic concerns dominate markets, then we will see a drop in rates. If optimism based on progress on trade wars or central bank dovishness prevails in the markets, then there will be a spike in rates. For now, I think rates continue their consolidation pattern and that mortgage rates will be flat in the coming week.”

 

Jim Sahnger, a mortgage planner with C2 Financial Corp, agrees, saying, “The economy continues to show cracks in continued growth and this should keep rates in check. The Fed recognized that growth is becoming a concern in its minutes from its last meeting and without sustained growth, inflation just isn’t there. With little inflation fears, rates can stay range bound for now.”