What You Need to Know About 30 Year Fixed Mortgage Rates

The 30 year fixed mortgage rates are the interest rates that are applied to loans with a 30-year term. The rates fluctuate in reaction to movements of economic indices. However, once you get a 30-year fixed rate mortgage, the interest rate of your loan will be locked at the prevailing or agreed rate at the time your loan is approved and that interest rate will stay the same for the duration of your loan. The monthly amortization will be computed based on the fixed interest rate so you will be paying a fixed monthly payment for the entire duration of your loan unless you should decide to pay the remaining balance before the end of the term of the loan.

The 30 year fixed mortgage rates are best suited for mortgagors who do not want to be bothered about rate fluctuations. They would simply pay a predictable monthly payment over many years. Also, with the 30 year fixed mortgage rates, the mortgage payment or amortization is spread equally month to month over the 30-year term so it is more affordable to people earning regular monthly income. Moreover, it provides more tax deduction than shorter-term mortgage.

Although the monthly payment for a 30-year loan will be lower compared to shorter -term loan, the interest amount that will be paid over the life of the loan will be more. A shorter term loan may have lower interest rates and therefore lower interest payments but the repayments are spread over a shorter period of time, therefore higher monthly amortization will be required.

In the week ending on June 17, the average conforming 30-year fixed mortgage rate increased slightly to 4.75 percent, from the 4.72 percent average in the previous week. For the same period last year, the weekly average was 5.38 percent. In the past twelve months, the 30 year fixed mortgage rates are in their historically low level. The weekly averages in this period range from 4.7 percent to 5.7 percent. According to the Primary Mortgage Market Survey by Freddie Mac, the annual average of the conforming 30 year fixed mortgage rates reaches to as high as 16.63 percent in 1981 and it goes down to 5.04 percent average in 2009.

Because of the prevailing low 30 year fixed mortgage rates, borrowers should consider applying for refinancing of existing loans. This is a way of taking advantage of low interest rates. Refinancing is simply replacing a previous loan with a new loan under different term. This is being resorted to especially when interest rates go down significantly. This will benefit the borrowers since the interest payments will be reduced accordingly. However, in deciding to apply for refinancing your 30 year fixed mortgage rates loan, you must consider the variable costs involve. Usually, penalty clauses are provided in fixed-term loans that will be imposed in the event of early repayment of the loan. This and the cost of processing for the new loan should be considered whether or not the interest payment that can be saved through refinancing is worth the effort.


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Lam Bong is an Author living in Sydney, Australia. He is interested in reading and creating websites. His latest website is about financial services Adelaide and financial planning benefits on the web today.