Current Mortgage Rates

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Current Mortgage Rates

On June 13, 2016, average rates were 3.7% for a 30 year fixed rate mortgage. The rates declined to 3.51% on July 7, 2016, and rose back up to 3.64% on July 14, 2016.  The rates for a 15 year fixed rate mortgage were 3.07% on June 13, 2016.  They went down to 2.95% on July 6, 2016, and up to 3.01% on July 14, 2016.  Current mortgage rates for an FHA backed rates on a 30-year mortgage is 3.42% on average.

What is Affecting Current Mortgage Rates Today?

What is popularly known as Brexit-  On June 23, 2016, the U.K. made a vote to leave the European Union.  Subsequently, at this time rates dropped, however, the rates have returned to levels prior to the announcement of the Brexit.  As of this week, there has been a steep climb on interest rates for 30 year fixed rate mortgages affecting the current mortgage rates. Furthermore, industry experts predict that rates will remain stable throughout the summer.

In other news affecting current mortgage rates, has to deal with the Federal Reserve.  In their May 2016 and June 2016 sessions, the Federal Reserve hinted at the possibility of interest rate increases, however, back peddled in relation to the slow progress and improvement in the current economy, particularly with the job sector.

What Do Interest Rates Have to Do with Mortgages?

In particular, current mortgage rates determine how much your mortgage payment will be. Meanwhile, a lower interest rate equals a lower monthly payment, while a higher interest rate equals a higher monthly payment.  Why is this?  Well, a loan with a higher interest payment will require a larger portion of your payment to be applied to interest and a lower interest rate will require a smaller portion of your monthly payment to go to interest. Why does this matter?  When you make a payment and a portion of your monthly payment goes to principal and interest. 

Assuming property taxes and insurance are taken out, when you make a payment, a portion is applied to principal and a portion to interest.  Over time, the principal balance will decrease and the payments applied to interest will decrease.  This is called amortization.  When you have a higher interest rate, you will be required to make a bigger monthly payment because the interest payment is higher.

Why Does This Matter?

In summary, having a higher monthly payment can affect how much house you can qualify for.  For instance, when you apply for a mortgage loan, your ability to pay your monthly mortgage payment is calculated using your debt-to-income ratio?  What is your debt-to-income ratio? Your debt-to-income ratio is your total monthly household obligations such as credit card debt, car payments, and other debt that typically show on your credit report. 

Your projected monthly house payment is added to your debt to income ratio.  This total is divided by your gross monthly income, meaning your income before taxes or deductions are taken out.  The end result is your debt-to-income ratio. 

How Does This Affect Me?

Rising interest rates could be detrimental to a borrower who is marginal.  Marginal meaning, that a higher interest rate could kill the deal.

About the Author: Arlene Disessa is a senior writer for California Loans with Gustan Cho Associates in the Greater Sacramento, California area, including Placer County, and the cities of Rocklin, Roseville, Granite Bay, El Dorado Hills, and Auburn.  Call Us today at 530.813.0661 or email at adisessa@rhloans.com.  Arlene Disessa is available 7 days a week to answer your questions.  Do you have bad credit? Call Us today on ways you can improve your credit score and qualify for a mortgage loan. For more useful information visit http://www.california-loans.com

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