Compare Adjustable Rate Mortgage (ARM) Rates and Lenders
Review current mortgage rates for August 21, 2017 and get personalized mortgage quotes from top lenders
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Mortgage Rate ReportMonday, August 21, 2017
Mortgage rates continued their winning streak, remaining steady for the fourth consecutive week following the Federal Reserve's decision to leave interest rates unchanged at its July meeting. The Fed pointed to low inflation as a counterbalance to an improved labor market as well as expanding household spending and business investment in its decision to maintain the target range for the federal funds rate at 1.000% to 1.250%. Industry analysts had expected the Fed to stay put on interest rates at the July meeting so the decision has had relatively little impact on mortgage rates since the announcement. A strong jobs report to open August failed to move rates higher as expected and instead key mortgage rates remained flat on the week and continue to hover near their low point for 2017.
The interest rate for a 30 year fixed rate mortgage held steady at 3.625% and jumbo mortgage rates also remained flat at 3.750%, while other mortgage programs followed suit. The interest rate for a 15 year mortgage stayed put at 2.875% and the interest rate on a 5/1 adjustable rate mortgage (ARM) held at 2.750%, as lenders attempt to pull borrowers into shorter-term mortgage programs. VA mortgage rates remained at 3.250%, matching FHA mortgage rates which were also steady at 3.250%, with both programs remaining enticing for home buyers seeking low or no down payment loan options. Non-owner occupied mortgage rates were the sole mover on the week, dipping 0.125% to 3.750%.
After a turbulent first quarter of 2017, mortgage rates were relatively steady and attractive for much of the the second quarter. As we move deeper into the third quarter, the Federal Reserve's decision to hold interest rates at their current level further stabilized the mortgage market. Another week of flat rates means we are approaching multiple months of relatively stable and low mortgage rates that have brought increased certainty to the marketplace for both borrowers and lenders.
Despite the relatively steady current mortgage market, mortgage rates remain highly challenging to predict. The Fed’s decision to leave rates unchanged at its July meeting only bolsters the likelihood that the Fed will raise rates at a future meeting in 2017. In fact, the Fed reaffirmed its outlook for another rate increase in 2017 and recent strong labor and economic reports, including a decline in the unemployment rate and robust jobs growth, reinforce the potential for a future rate hike. Additionally, a Fed official recently reiterated the Federal Reserve's intention to raise interest rates before year end despite continued low inflation. Prospective borrowers looking to buy a home or refinance their mortgage may be able to lock in a lower interest rate by acting sooner rather than later, before mortgage rates increase, potentially at an accelerated pace.
Because interest rates change daily, we continue to actively monitor the mortgage market for changes. Borrowers should check the FREEandCLEAR mortgage rate tables regularly to review customized, updated mortgage rates for lenders in their area. Our rate tables are free to use and require no personal information.
Why Select an Adjustable Rate Mortgage (ARM)
Lower Initial Rate.
The initial interest rate for an ARM is typically lower than the interest rate on a 30 year fixed rate mortgage. Borrowers benefit from the lower interest rate, sometimes called a “teaser” rate, for the first 3, 5, 7 or 10 years of the loan, depending on what type of ARM you select. After this initial period, which is also called the fixed rate period, the interest rate is subject to change and possibly increase. Borrowers who know they are only going to own their home for a set period of time are able to take advantage of the lower interest rate afforded by an ARM, without being exposed to the risk that their interest rate increases in the future.
Lower Monthly Payment.
A lower interest rate means a lower monthly payment for borrowers. A lower monthly mortgage payment provides additional financial flexibility for borrowers and makes owning a home more affordable, at least during the initial fixed rate period of the loan. The flip side of an adjustable rate mortgage is that your monthly payment can potentially increase in the future if interest rates go up. Borrowers need to make sure that they can afford their monthly payment both at the beginning of the mortgage, when the interest rate is lower, and over time if their payment goes up.
Larger Mortgage Amount.
The lower teaser interest rate and monthly payment enable borrowers to afford a larger mortgage amount and potentially buy more home. Being able to qualify for a larger mortgage amount is one of the main attractions of an adjustable rate mortgage. The downside of being able to afford a larger loan amount with an adjustable rate mortgage is that you lose the certainty that comes with a fixed rate mortgage, where the interest rate remains the same over the life of the mortgage.
You Think Interest Rates Will Go Down.
The interest rate for an adjustable rate mortgage is subject to change after a fixed period of time, usually the first 3, 5, 7 or 10 years of the mortgage. The period of the loan when the interest rate can change is called the adjustable rate period and lasts until the end of the loan term, which is usually 30 years. If you think interest rates will decline in the future then an adjustable rate mortgage may be a good option. Because if interest rates go down during the adjustable rate period of your loan, your monthly payment will decrease which is great for borrowers. Please note that predicting interest rates is highly challenging so this approach can expose you to significant risk.
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More FREEandCLEAR Mortgage Resources
Use our Adjustable Rate Mortgage Calculator to calculate the initial monthly payment and worst case scenario for an ARM based on today’s interest rates
Understand the ins and outs of an adjustable rate mortgage (ARM) including key loan terminology and how they work
Adjustable rate mortgages involve more risk than other types of mortgages. Be sure to understand the downsides of an ARM so you can make an informed decision when you select your mortgage
Got a question about an adjustable rate mortgage (or any mortgage topic)? Ask the FREEandCLEAR Mortgage Expert and receive an informative response within 24 hours