Mortgage rates today, September 20, 2023, plunge ahead of Fed announcement.

Mortgage Rates: What You Need to Know

Are you considering buying a home or refinancing your mortgage? If so, understanding mortgage rates is essential. Luckily, we’ve got you covered with the latest updates on mortgage rates, including insights from our experts and a rundown on the different types of mortgages available. So, let’s dive in and explore what’s happening in the world of mortgages.

The Current Landscape

The Federal Reserve Influence

The Federal Reserve recently concluded its September meeting, and while no hike to the federal funds rate was announced, it’s always interesting to hear what Fed Chair Jerome Powell has to say. The market pays close attention to his press conferences for clues about the central bank’s next steps.

If Powell hints at future rate hikes, mortgage rates could inch up as investors anticipate those changes. However, he may reiterate the Fed’s cautious approach, emphasizing that decisions will be made based on economic data. In this scenario, mortgage rates may remain at their current levels for a while longer.

A Drop in Mortgage Rates

Regardless of the Fed’s actions, mortgage rates have recently decreased across the board. The average 30-year fixed mortgage rate has dropped by 16 basis points compared to last week, making it an attractive time for potential homebuyers or those considering refinancing.

So how do these rates translate into actual monthly payments? Let’s take a look at the different mortgage options available and their associated rates:

Mortgage Options

30-Year Fixed Mortgage Rates Decrease (-0.16%)

The most common type of home loan, the 30-year fixed-rate mortgage, offers stability. With this mortgage, you’ll pay back what you borrowed over 30 years, with an interest rate that remains unchanged throughout the loan’s lifespan. At the current average rate of 6.89%, your monthly payments towards principal and interest would be $658 for every $100,000 you borrow.

20-Year Fixed Mortgage Rates Inch Down (-0.02%)

A 20-year fixed-rate mortgage is a less common option but worth considering. This loan type allows borrowers to pay off their mortgage over a shorter period. With an interest rate of 6.79%, you would spend $763 per month for every $100,000 borrowed.

15-Year Fixed Mortgage Rates Essentially Flat (+0.01%)

For those looking to pay off their mortgage even quicker and save on interest, a 15-year fixed-rate mortgage might be a perfect fit. While the monthly payments will be higher than a 30-year option, the difference in interest paid over time can be substantial. At a rate of 6.29%, you would pay $860 monthly for every $100,000 borrowed.

Adjustable-Rate Mortgages (ARM)

Adjustable-rate mortgages (ARM) offer an alternative to fixed-rate loans. These mortgages have a fixed rate for an initial period (e.g., 7 or 5 years) and adjust annually after that. Here are the current rates for two popular ARM options:

7/1 ARM Rates Go Up (+0.17%): With a 7/1 ARM, the interest rate remains fixed for the first seven years, after which it adjusts annually. The current rate stands at 7.62%, resulting in a monthly payment of $707 for every $100,000 borrowed during the initial period.
5/1 ARM Rates Go Down (-0.06%): The 5/1 ARM also has a fixed rate for the first five years before adjusting annually. At a rate of 7.23%, your monthly payment would be $681 per $100,000 borrowed during the initial period.

FHA and VA Mortgage Options

Mortgages backed by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) cater to specific groups of borrowers. Here are the latest rates for these loan options:

30-Year FHA Rates Are Flat (No Change): At an interest rate of 6.04%, you would pay $602 every month towards principal and interest for every $100,000 borrowed. FHA mortgages are an excellent choice for those who don’t qualify for conventional loans.
30-Year VA Rates Basically Unchanged (-0.02%): VA loans offer eligible veterans and active-duty military members competitive interest rates. At 6.11%, your monthly payment would be $607 per $100,000 borrowed.

Refinance Rates

Refinancing your mortgage can be a smart financial move, especially when rates are favorable. Let’s explore the current refinance rates:

30-Year Fixed Refinance Rates Down Slightly (-0.06%)

Refinancing into a 30-year term can lower monthly payments, but it may result in paying more interest over time. At an average rate of 7.17%, your monthly payment would be $677 for every $100,000 borrowed.

20-Year Fixed Refinance Rates Increase (+0.11%)

While a 20-year fixed-rate refinance comes with higher monthly payments, you can save on interest compared to a 30-year term. The current rate sits at 6.92%, translating to a monthly payment of $771 per $100,000 borrowed.

15-Year Fixed Refinance Rates Decrease (-0.25%)

Refinancing into a 15-year term can save you money in the long run, as it typically comes with lower rates and a faster repayment schedule. At a rate of 6.50%, your monthly payment would amount to $871 per $100,000 borrowed.

Adjustable-Rate Mortgages (ARM) Refinance

Refinancing an existing ARM offers an opportunity to secure a new rate or switch to a fixed-rate mortgage. Here are the current rates for two popular ARM refinance options:

7/1 ARM Refinance Rates Increase (+0.21%): After seven years, your interest rate will adjust annually. With the current rate at 7.97%, the initial monthly payment would be $732 per $100,000 borrowed.
5/1 ARM Refinance Rates Drop (-0.27%): The 5/1 ARM refinance provides a fixed rate for the first five years. At a rate of 7.27%, your monthly payment would be $684 for the initial period.

FHA and VA Refinance Options

FHA and VA loan holders can also take advantage of refinancing opportunities. Here are the current refinance rates for these loan types:

30-Year FHA Refinance Rates Stay the Same (No Change): An FHA refinance rate of 5.92% would equate to a monthly payment of $594 per $100,000 borrowed.
30-Year VA Refinance Rates Down by a Point (-0.01%): At a rate of 6.34%, your new monthly payment would be $622 per $100,000 borrowed.

Predicting the Future of Mortgage Rates

With mortgage rates moving up from historic lows and experiencing volatility, many wonder what the future holds. Factors like inflation and economic conditions influence the direction of mortgage rates.

As inflation subsides, mortgage rates are expected to recede somewhat. In the event of a recession, rates may decrease further. However, it’s likely that average 30-year fixed rates will remain within the 6% to 7% range in the near term.

Exploring Alternatives: Home Equity Line of Credit (HELOC)

While waiting for mortgage rates to ease, homeowners may want to consider using their home’s equity to cover major expenses through a home equity line of credit (HELOC). A HELOC works similarly to a credit card, allowing you to borrow against the equity in your home as needed.

HELOC rates are currently relatively low compared to other loan options like credit cards or personal loans. If you’re interested in exploring HELOCs, check out our list of the best lenders available.

Final Thoughts

Understanding the current mortgage rates and finding the right loan option can save you thousands of dollars over the life of your loan. Whether you’re a prospective homebuyer or looking to refinance, the mortgage market offers a variety of options to choose from.

Keep your eye on economic indicators and expert insights to stay informed about potential rate changes. And as always, consult with mortgage professionals who can guide you through the process and help secure the best mortgage rates for your needs.