Mortgage rates inch up in December
Anyone out to buy or refinance a home this month will find that current mortgage rates are slightly higher than they were at this time last December.
It's been well over a year since the Federal Reserve ended a campaign to drive down long-term interest rates, a move that was widely expected to push mortgage rates higher. But we've seen near-record-low rates for most of the year until now.
Indeed, rates are in the process of inching upward.
The average interest rate on a conventional 30-year fixed-rate home loan is 4.15%, about a tenth of a percentage point higher than it was at this time last year and nearly a half of a percentage point more than it was at this time just one month ago.
Still, mortgage rates are historically low.
And remember, that's the average cost of financing a home. Savvy borrowers with decent credit can almost always pay a quarter to half of a point less.
Spend a few minutes searching our extensive database for the best current mortgage rates from dozens of lenders in your area. You'll see what we mean.
National Average Mortgage Rates
|Type of loan||Current average||Record-low average||Established|
|30-year fixed rate||4.15%||3.50%||Dec. 5, 2012|
|15-year fixed rate||3.40%||2.75%||May 1, 2013|
|30-year fixed jumbo||4.14%||3.54%||Sept. 7, 2016|
|5/1 ARM||3.45%||2.63%||May 1, 2013|
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Jumbo mortgages are cheap
One oddity that's carried over into this year is that the average cost of 30-year fixed-rate jumbo loans is remaining nearly as low, or even lower in some cases, than 30-year fixed-rate conventional mortgages.
Jumbo loans are mortgages that are too large to be purchased by Fannie Mae and Freddie Mac, the two government-owned companies that buy or guarantee most of the mortgages issued by banks and other lenders.
The largest loans they can buy depend on where the home is located but range from $417,000 in most places to $625,000 in the nation's most expensive cities.
Jumbo mortgages are most needed by affluent buyers whose savings and earnings have rebounded from the recession more quickly and fully than those of middle-income families.
The nation's largest banks, including JPMorgan Chase, Bank of America and Wells Fargo, are vying for that business not only by lowering rates but by reducing the minimum credit score and down payment required for million-dollar loans.
Last year, for example, JPMorgan announced it was lowering its minimum acceptable FICO score from 740 to 680 and accepting down payments of as little as 15% on homes up to $3 million.
The sale of such pricey property helped to push median home values, and the average amount Americans are borrowing to finance those purchases, to all-time highs, eclipsing previous records set at the peak of the housing bubble in 2006 and 2007.
Despite that, a report from the Consumer Financial Protection Bureau found that nearly half of Americans seriously consider only one lender or broker before applying for a mortgage. And about 75% fill out an application with only one lender.
We need to be doing more comparison shopping than that, especially when interest rates begin to rise.
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Where mortgages rates are headed
The Federal Reserve is expected to start pushing rates higher this month, causing mortgage costs to steadily increase.
But while rates may be on the rise, home loans are becoming easier to get, even for buyers not in the jumbo market.
Homebuyers who qualified for conventional loans had an average FICO credit score of 763 in 2012, according to Ellie Mae.
By 2015, that had fallen to 754, and that's about where it remained for all of last year.
The average FICO score for homeowners who refinanced through a conventional loan fell from 748 at the end of 2012 to 727 at the end of 2015.
In October 2016, that moved to 745 for a conventional refinance, 753 for a purchase.
FHA loans clearly helped borrowers with too much debt and lower credit scores.
The average FICO score for those homebuyers fell from 718 at the end of 2012 to 651 at the end of 2015. In October 2016, it was at 686 for an FHA purchase and 653 for a refinance.
Those are exactly the kinds of trends that help borrowers land the loans they need.
And with current mortgage rates still historically low, it's a great time to be in the market to purchase or refinance a home.
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