Average U.S. Mortgage Rates 2019 - Elite Personal Finance
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Average U.S. Mortgage Rates 2019

EPF Last Update: May 4, 2019
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As we move closer toward the first half of 2019, average U.S. mortgage rates continue to sit near historic lows.

While the average 30-year FRM and the average 15-year FRM displayed a slight uptick over the last week, both measures of long-term interest rate expectations have declined by 30 basis points (0.30%) and 32 basis points (0.32%) respectively over the last year.

Check out the table below:

 

Period:Average 30-Year FRM:Average 15-Year FRM:Average 5/1-Year ARM:
April 18, 20194.17%3.62%3.78%
1-Week Change+ 0.05%+ 0.02%– 0.02%
1-Year Change– 0.30%– 0.32%+ 0.11%

 

Using the latest data from the Freddie Mac Primary Mortgage Market Survey, we analyzed statistics dating back to 1971 to present the most accurate depiction of average mortgage rates within the United States. Compiled using responses from top U.S. mortgage lenders, average 30-year and 15-year FRM data applies to conventional mortgages financed with an 80% loan-to-value ratio.

Now, before we get into the numbers, let’s run through a few definitions.

A fixed-rate mortgage (FRM) is an amortizing loan with a constant interest rate. This means your interest rate and monthly mortgage payment stays the same throughout the entire loan. Conversely, an adjustable-rate mortgage (ARM) is an amortizing loan with a variable interest rate. This means the rate changes over the life of the loan, usually based on rate movement in the U.S. Treasury market.

And the average 5/1-year ARM?

Embedded with both fixed and variable components, a 5/1-year ARM is a hybrid mortgage where the 5 implies a fixed rate for the first five years with a variable rate thereafter.

 

Average Mortgage Rates 2019: Statistics and Key Findings

As of April 18, 2019, the average 30-year FRM currently sits at 4.17%, with the average 15-year FRM coming in at 3.62% and the average 5/1-year ARM coming in at 3.78%.

The all-time high for the average 30-year FRM is 18.63%, which occurred in October of 1981. The all-time high for the average 15-year FRM is 8.89%, which occurred in December of 1994. The all-time high for the average 5/1-year ARM is 6.39%, which occurred in July of 2006.

Since the 2008 financial crisis, the average 30-year FRM hasn’t exceeded 6%.

Using the last 10-years of data, the end-of-year average 30-year FRM peaked at 5.14% in 2009 and bottomed at 3.35% in 2012. Over the same period, the average 15-year FRM peaked at 4.54% in 2009 and bottomed at 2.65% in 2012. Continuing the trend, the average 5/1-year ARM peaked at 4.44% in 2009 before bottoming at 2.70% in 2012.

Using the last 10-years of data, the lowest-low for the average 30-year FRM was 3.31%, which occurred in November of 2012. Conversely, the highest-high was 5.59%, which occurred in June of 2009. For the average 15-year FRM, its lowest-low of 2.56% occurred in May of 2013, while its highest-high of 5.06% occurred in January of 2009. For the average 5/1-year ARM, its lowest-low of 2.68% occurred in July of 2016, while its highest-high of 5.49% occurred in January of 2009.

Using the last 10-years of data – and comparing to the average 30-year FRM – the average 15-year FRM has a lowest-low that’s 75 basis points (0.75%) less than the average 30-year FRM and highest-high that’s 53 basis points (0.53%) less than the average 30-year FRM.

When comparing the average monthly 5/1-year ARM to the monthly federal funds rate dating back to January of 2005 – the two variables have a correlation of 0.82 and an R-squared of 0.67.

Average U.S. Mortgage Rates 2019: Charts, Graph, Analysis

 

Historical Average US Mortgage Rates

When isolating end-of-year figures, the average 30-year FRM peaked at 5.14% in 2009 and bottomed at 3.35% in 2012. As the figure continues to gyrate up-and-down from year-to-year, it signals a lack of clarity among lenders regarding the direction of future interest rates.

Following right along, the average 15-year FRM displays a similar trend.

Peaking at 4.54% in 2009, the figure also bottomed at 2.65% in 2012. As well, from 2012 to 2018 – just like the average 30-year FRM – the figure changed from increases to decreases from year-to-year, while only stabilizing for two consecutive years of positive growth from 2014-2016.

 

Year (End):Average 30-Year FRM:Average 15-Year FRM:Average 5/1-Year ARM:
20095.14%4.54%4.44%
20104.86%4.20%3.77%
20113.95%3.24%2.88%
20123.35%2.65%2.70%
20134.48%3.52%3.00%
20143.87%3.15%3.01%
20154.01%3.24%3.08%
20164.32%3.55%3.30%
20173.99%3.44%3.47%
20184.55%4.01%4.00%

While still exhibiting the same characteristics, the average 5/1-year ARM displays much less interest rate volatility.

Because of the variable component embedded within the product, it has a much closer connection to US Treasury yields. Despite that – like its counterparts above – the average 5/1-year ARM peaked at 4.44% in 2009 before bottoming at 2.70% in 2012.

 

Average 30-Year Fixed Rate Mortgage: Historical Highs and Lows

When parsing the data from a high-low perspective, the lowest-low for the average 30-year FRM was 3.31%, which occurred in November of 2012. Conversely, the highest-high was 5.59%, which occurred in June of 2009.

Average 30-Year FRM

Year:Lowest Rate:Highest Rate:
20094.71%5.59%
20104.17%5.21%
20113.91%5.05%
20123.31%4.08%
20133.34%4.58%
20143.80%4.53%
20153.59%4.09%
20163.41%4.32%
20173.78%4.30%
20183.95%4.94%

Historical Average 30-Year Fixed Rate Mortgage Graph

What’s even more interesting – since the 2008 financial crisis – the average 30-year FRM hasn’t exceeded 6%.

 

Average 15-Year Fixed Rate Mortgage: Historical Highs and Lows

Over the last 10-years, the average 15-year FRM saw its lowest-low of 2.56% in May of 2013 and its highest-high of 5.06% in January of 2009. The figure also saw an all-time high of 8.89%, which occurred in December of 1994.

 

Average 15-Year FRM

Year:Lowest Rate:Highest Rate:
20094.27%5.06%
20103.57%4.52%
20113.21%4.29%
20122.63%3.30%
20132.56%3.60%
20143.08%3.56%
20152.92%3.25%
20162.72%3.55%
20173.08%3.50%
20183.38%4.36%

Average 15-Year Fixed Rate Mortgage: Historical Highs and Lows

When comparing the two directly, the average 15-year FRM has a lowest-low that’s 75 basis points (0.75%) less than the average 30-year FRM and highest-high that’s 53 basis points (0.53%) less than the average 30-year FRM. And like the data suggests, the average 15-year FRM is more accommodative to borrowers than the average 30-year FRM.

So why is that?

Well, it mainly comes down to interest rate risk.

With lenders able to recoup their loans in half the time, the risk premium priced into a 15-year fixed rate mortgage is much lower. And because of the shorter duration, lenders are better protected from the opportunity cost of rising rates. See, if interest rates rise, lenders earn less than what they would receive if they re-issued the mortgage at the higher rate. Thus – from a lenders perspective – the shorter the maturity, the less chance of being stuck on the losing end of interest rate fluctuations.

 

Average 5/1-Year Adjustable Rate Mortgage: Historical Highs and Lows

As a hybrid of a fixed and variable rate mortgage, the average 5/1-year ARM behaves very similarly to U.S. Treasuries. And because of its short-term duration, the average 5/1-year ARM is even more sensitive to Federal Reserve policy than its counterparts above.

Over the 10-year sample period, the average 5/1-year ARM saw its lowest-low of 2.68% in July of 2016, and its highest-high of 5.49% in January of 2009. As well – with a rate of 6.39% – the all-time high occurred in July of 2006.

 

Average 5/1-Year ARM

Year:Lowest Rate:Highest Rate:
20094.18%5.49%
20103.25%4.44%
20112.85%3.92%
20122.69%2.96%
20132.56%3.28%
20142.91%3.15%
20152.82%3.08%
20162.68%3.32%
20173.07%3.47%
20183.45%4.14%

Average 5/1-Year Adjustable Rate Mortgage: Historical Highs and Lows

Now, how do the figures compare to the federal funds rate?

Well, before we get into the details, let’s discuss how the federal funds rate works.

Structured as the overnight interest rate banks and depository institutions charge one another to borrow money, institutions with surplus reserves lend to other members in need of short-term cash. While the final rate is determined by the institutions themselves – and depends heavily on perceived credit risk – it’s also greatly influenced by Federal Reserve policy.

The bottom line is: if the Fed wants to increase interest rates, it sells government bonds and decreases liquidity. If it wants to decrease interest rates, it buys government bonds and increases liquidity.

Check out the chart below:

 

Federal Funds Rate

Year:Lowest Rate:Highest Rate:
20090.12%0.22%
20100.11%0.20%
20110.07%0.17%
20120.08%0.16%
20130.08%0.15%
20140.07%0.12%
20150.11%0.24%
20160.34%0.54%
20170.65%1.30%
20181.41%2.27%
20192.40%2.41%

 

Dating back to January of 2005 – comparing the average monthly 5/1-year ARM to the monthly federal funds rate –– the two data sets show a correlation of 0.82 and an R-squared of 0.67. We chose to sample monthly data because the federal funds rate is compiled on a monthly basis so it allows for direct comparison. As well, Freddie Mac began compiling data on the average 5/1-year ARM in January of 2005.

So how do we interpret the results?

Well, a correlation of 0.82 signals a strong positive linear trend between the two variables. And an R-squared of 0.67 tells us that 67% of the movement in the average 5/1-year ARM can be explained by movement in the federal funds rate.

 

How We Conducted the Study

To present the most accurate assessment of average mortgage rates within the United States, we analyzed Freddie Mac data from 1971 to 2019. Its Primary Mortgage Survey – which compiles data from lenders on their most popular 30-year fixed rate, 15-year fixed rate and 5/1-year hybrid mortgages – continues to serve as one of the most reliable and accurate sources of regional and national mortgage rate trends. We also compiled federal funds rate data from the U.S. Federal Reserve.

As well, our study uses the most up-to-date statistics as of April 18, 2019.

 

Conclusion

With interest rates currently stuck in neutral, average mortgage rates are trending toward the downside. With 1-year declines in the 30-year FRM of 30 basis points (0.30%) and the 15-year FRM of 32 basis points (0.32%), mortgage lenders are pricing in a decrease in long-term interest rates. Bucking the trend, the 5/1-year ARM displayed an 11 basis point (0.11%) increase over the last year, however – as we explained above – the rate is short-term in a nature and its variable component mirrors movement in the federal funds rate.

So where do we go from here?

Well, many capital market participants expect the Federal Reserve to either hold steady or cut interest rates over the next year. And with President Donald Trump urging Jerome Powell – Chairman of the Federal Reserve – to cut rates and help stimulate economic growth, average mortgage rates seem poised for further reduction.

 

Sources

https://fred.stlouisfed.org/series/FEDFUNDS

http://www.freddiemac.com/pmms/

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