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Mortgage Rates Drop Again as FOMC Continues Tapering

Mortgage analysts were expecting higher mortgage rates in 2014 because of the tapering of purchases by the Federal Open Market Committee (FOMC). Everyone expected mortgage rates to move higher when the FOMC started slowing their monthly purchases of mortgage-backed securities (MBS) and long term U.S. Treasuries.

The Fed has slowed their monthly purchases to $45 billion a month this month, down from $85 billion a month last year. So far this year average 30 year conforming mortgage rates have fallen from 4.55 percent to today's average rate of 4.20 percent. Average 15 year conforming mortgage rate have also fallen from 3.57 percent to 3.25 percent. These lower mortgage rates are great news if you're buying a home or if you're refinancing a mortgage.

For example, compare the difference between taking out a 30 year loan for $500,000 at 4.00 percent versus 4.50 percent. A rate difference of 0.50 percent lowers your monthly mortgage payment by about $150. Mortgage rates are expected to head towards 5.00 percent by the end of 2014, so in this example the same $500,000 mortgage at 5.00 percent will cost $300 more a month.

As mortgage rates move higher, the dollar amount you quality for moves lower. There are monthly debt-to-income ratios that determine how much you quality for. Your monthly fixed expenses, housing costs, car payments, credit card payments, etc., can't exceed 43 percent to 45 percent of your gross income. In short, the longer you wait to buy a home, the less home you can afford.

When refinancing a mortgage loan to another loan with the same term, it makes financial sense if the new rate is at least 1.00 percent lower. How long you plan to stay in your home is also a factor to consider when refinancing. There are upfront costs when refinancing but you can recoup those costs by having a lower monthly mortgage payment. You have to plan on living in the home long enough to recoup the refinancing costs. You can use a mortgage calculator to see what options make the most sense for you.

Following is a list of average mortgage rates and the lowest mortgage rates available today.

Average Mortgage Rates Today

  • 30 Year Fixed Conforming Rate 4.200%

  • 15 Year Fixed Conforming Rate 3.250%

  • 30 Year Fixed Jumbo Rate 4.580%

  • 5/1 Year ARM Conforming Rate 3.270%

  • 5/1 Year ARM Jumbo Rate 3.430%

Lowest Conforming Mortgage Rates Today

  • 30 Year Rates 3.75%

  • 15 Year Rates 2.75%

  • 3/1 Year Rates 1.99%

  • 5/1 Adjustable Rates 2.375%

  • 7/1 Adjustable Rates 2.625%

  • 10/1 Adjustable Rates 3.125%

Lowest Jumbo Mortgage Rates Today

  • 30 Year Rates 3.875%

  • 15 Year Rates 3.25%

  • 3/1 Year Rates 1.99%

  • 5/1 Adjustable Rates 2.25%

  • 7/1 Adjustable Rates 2.875%

  • 10/1 Adjustable Rates 3.375%

Author: Brian McKay
May 9th, 2014