Mortgage rates today: Monday, March 8, 2021
On Monday, March 8, 2021, the average interest rate on a 30-year fixed-rate mortgage rose eight basis points to 3.2% APR. The average rate on a 15-year fixed-rate mortgage went up 14 basis points to 2.515% APR and the average rate on a 5/1 adjustable-rate mortgage rose six basis points to 2.815% APR, according to rates provided to NerdWallet by Zillow. The 30-year fixed-rate mortgage is 16 basis points higher than one week ago and 26 basis points lower than one year ago. A basis point is one one-hundredth of one percent. Rates are expressed as annual percentage rate, or APR.
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Mortgage rates this week
A run-up in mortgage rates began in February and continued into the week ending March 4.
The 30-year fixed-rate mortgage averaged 3.09% APR, up five basis points from the previous week's average.
The 15-year fixed-rate mortgage averaged 2.40% APR, up two basis points from the previous week's average.
The five-year adjustable-rate mortgage averaged 2.95% APR, down two basis points from the previous week's average.
Would-be refinancers are ruefully looking back at the good ol' days of just three weeks ago. In mid-February, the 30-year fixed was 30 basis points lower. With the sharp rise in interest rates, fewer people have a money-saving incentive to refinance their mortgages.
As mortgage rates continue to rise this year, and as home sales heat up this spring and summer, lenders will be forced to make a transition from refinances to purchases.
Mortgage lenders have been catering mostly to refinancers in recent months. They didn't have to reach out strenuously to customers, because customers were reaching out to them proactively. But lenders will step up their marketing this year to get the attention of home buyers, especially first-timers without brand loyalty.
Expect lenders to compete on customer service, rates and fees. But don't expect lenders to compete by relaxing their lending standards significantly. They'll still offer the best deals to borrowers with credit scores of 740 or higher and down payments of at least 20%.
You can still get a mortgage if your credit score is below 740 and you don't have a 20% down payment. But you'll probably pay a higher combination of rate and fees, plus mortgage insurance.
March mortgage rates forecast
Mortgage rates leaped higher in the second half of February and probably will continue rising in March.
The average rate on the 30-year fixed-rate mortgage went up 0.43 of a percentage point from the end of January (2.73%) to the end of February (3.16%). February's jump in rates was one of the most significant in the last three years because nearly 5 million homeowners lost their incentive to refinance.
About 18.1 million homeowners could have cut their mortgage rates by at least 0.75% by refinancing when the 30-year mortgage was at 2.75%, as it was at the end of January. That's according to Black Knight, a mortgage analytics company. But when the 30-year mortgage rose to around 3.125% at the end of February, only about 13.3 million homeowners had the same incentive to refinance. A lot of potential refinancers remain, but their ranks shrank by around 4.8 million in February.
Why rates went up
The surge in mortgage rates happened in the second half of February, as the odds improved for an economic recovery. A $1.9 trillion coronavirus relief package snailed its way through Congress, and vaccine production continued to ramp up, even as winter storms caused distribution delays across much of the country.
Mortgage rates move up and down in concert with bond yields. You could make the case that the bond market jumped the gun in February, as yields rose sharply even though the relief package hadn't passed yet and a little more than one-eighth of Americans had been vaccinated against the coronavirus.
The inflation rate is low, the unemployment rate is high and the Federal Reserve isn't in a hurry to raise short-term rates. Given that combination of factors, you wouldn't expect significant upward movement in bond yields and mortgage rates. But it happened anyway.
What March looks like to me
I predict that fixed mortgage rates will continue to climb in March, but more slowly than they surged in the second half of February. Most of the increase in rates will happen in the first half of March, in the run-up to the passage of the COVID-19 relief bill.
In February, I predicted that mortgage rates would rise, but by less than 0.25%. I was right about them going up, but didn’t expect a jump of 0.43%. Financial markets reacted more positively than I expected to robust vaccine distribution and the progress of legislation for COVID-19 relief.
$1,500 a month doesn't go as far
February's move-up in mortgage rates chipped away at the amount home buyers could borrow to reach the same monthly payment compared with a month ago. The average loan amount was $344,800 and the average rate on the 30-year was 3.08% last week, according to the Mortgage Bankers Association. That yields a principal-and-interest payment of $1,469 (excluding taxes and insurance). For someone targeting a monthly P&I of $1,500, February's rate increase reduced borrowing power by around $17,000.