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Mortgage Interest Rates Fluctuate Minimally and Remain Low

Woman holding house keys
Mortgage interest rates altered minimally this week, affecting homeowners and investors differently, according to rate reports provided by loans.org.

For the week ending August 1, 2013, the 30-year fixed-rate mortgage (FRM) averaged 4.27 percent, a minimal shift upward from 4.24 percent set last week.

The 15-year fixed-rate mortgage averaged 3.26 percent. Last week, the average rate was slightly higher at 3.3 percent.

If a borrower took out a $300,000 home loan at today’s average 15-year rate of 3.26 percent, his or her monthly payment would be $2,109.46. After 15 years, he or she would pay a total of $379,702.80.

At this time last year, Freddie Mac reported the 15-year FRM average at 2.83 percent. Using this rate, if borrowers took an equivalent loan out a year ago, they would pay $2,047.30 a month, for a total cost of $368,514 after 15 years. The additional cost on a $300,000 home loan today versus an identical mortgage one year ago equates to $11,188.80.

The final monitored mortgage interest rate also saw minimal changes during the past week. The 5/1 adjustable-rate mortgage averaged 3.18 percent, a decrease from last week’s rate of 3.21 percent.

But mortgage rate fluctuations impact buyers and investors differently.

Residential mortgage notes are first sold to investors, pooled into Mortgage Backed Securities (MBS), which are then bought and sold like stocks, according to Joe Parsons, senior loan officer with mortgage banking company PFS Funding. This week’s Initial Jobless Claims report from the U.S. Department of Labor showed a positive sign for employees but a negative sign for mortgage interest rates, he said.

The report found that 19,000 fewer people applied for unemployment benefits this week in comparison with last week. Parsons said that MBS’ sold off heavily, reducing the price by 65 cents for each $100 in value.

For homeowners, Parsons said the impact of the mortgage interest rates increase is “partly economic, partly psychological.” Homeowners that considered a refinance but waited too long have likely lost their chance of locking in a lower rate, which can harm the economy.

“Because a refinance typically pumps more money into the economy, this rate increase is not good news for the economic recovery,” he said. “It is not a disaster, however, as millions of homeowners have already refinanced at the lower rates.”

Interested buyers looking for a new purchase and not just a refinance will continue their purchase even if rates increase.

“Most buyers do not purchase at the top of their qualifying range, so they will likely continue with their plans as before, but will simply accept a higher payment,” Parsons said.

Karyn Glubis, a real estate agent in Florida, agrees with Parsons that homeowners are still interested in purchasing a home this summer season.

“With home prices on the rise over last year and inventory down, this remains one of the best times to get in before the market changes drastically,” she said.