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Borrowers’ Credit Scores Key With Mortgage Rates Headed Toward 5%

Wake up home hunters and families who still have not refinanced that old, high-rate mortgage!

Experts forecast that the average interest charge on a benchmark 30-year fixed home loan soon will fly well above 4% on its way to 5% by the end of 2018.

On January 18th, Freddie Mac’s Primary Mortgage Market Survey reported that benchmark 30-year fixed loans averaged 4.04%, up from 3.99% a week earlier. A year ago—following the election of President Donald Trump—the 30-year fixed loan average was 4.09%.

On January 18th, 15-year fixed mortgages averaged 3.49%, up from 3.44% a week earlier. A year ago, lenders were quoting an average rate of 3.34% on 15-year fixed loans.

“This is the first time since last summer that the U.S. weekly average for the 30-year fixed mortgage rate rose above 4 percent,” noted Len Kiefer, Deputy Chief Economist for Freddie Mac. The current rate is the highest weekly average for the 30-year fixed mortgage since May of 2017.

“Some borrowers may be wondering if this is the last time we'll see 30-year fixed mortgage rates under 4%,” Kiefer said. “Inflation is firming, and the Federal Reserve reports that broad-based economic growth and labor markets are tightening. This means upward pressure on long-term rates, like the 30-year fixed-rate mortgage, is building.” With the Federal Reserve Board forecasting at least three or four quarter-point interest rate increases this year, analysts say lenders will be charging credit worthy borrowers 5% for 30-year fixed loans by the end of 2018. But what rate will borrowers with less-than-perfect credit scores have to pay?

A spot Chicago-area survey by on January 19th found rates on 30-year fixed loans ranging from 4.001% to 4.106%

According to a new study by LendingTree, the average interest rates lenders offered to borrowers depends a lot on a borrower’s FICO credit score.

Generally, mortgage brokers quote interest rates for a hypothetical borrower with a prime credit score who places a 20% down payment, the LendingTree report said. However, most borrowers do not fit this profile.

The LendingTree report includes the average quoted annual percentage rate (APR) by credit score, together with the average down payment and other metrics. (APR includes the interest rate charged plus lender fees.)

The consumer-oriented LendingTree report measures factors such as actual APR borrowers are offered, the down-payment amount, loan-to-value ratio, mortgage amount and interest paid over the life of the loan.

The most attractive interest rates are only offered to the most qualified applicants, the report disclosed. Mortgage rates vary depending on parameters such as credit scores, loan-to-value, annual income and type of property being purchased or refinanced. For the average borrower, LendingTree’s report shows that the APRs for 30-year fixed loans used to finance the purchase a home increased 12 basis points in December to 4.42%, the highest interest rate since July of 2016.

Consumers with the top FICO scores—those over 760—saw APRs of 4.26% in December, compared with 4.56% for borrowers with credit scores between 680 and 719.

This is a spread of 30 basis points. That’s more than a quarter of 1 percentage point on the interest rate—the widest gap since April of 2016.

This could mean nearly $15,000 in additional loan interest costs for borrowers with lower credit scores over the 30-year life of the loan for an average loan amount of $233,586, the report noted.

LendingTree reported that average purchase down payments have increased for eight straight months to reach $63,740 on an average loan amount of $233,586.

Borrowers with the best credit scores—760 or higher—placed a total down payment of $82,314 on an average loan amount of $252,033. Based on that down payment and a 4.26% APR, the borrower with the 760-plus credit score will repay $180,584 in interest over the life of the loan for the $252,033 mortgage.

Borrowers with mid-range credit scores—in the 680 to 719 range—place an average $43,604 to take out a mortgage of $216,985. Those second-tier borrowers will pay interest of $183,050 of the life of the loan and be charged an interest rate of 4.31% APR.

However, borrowers with a lower-tier credit score of 620 to 639 are required to place a larger down payment of $59,962 to take out a smaller loan amount of $195,540. Those lower-tier borrowers will pay a whopping interest charge of $218,347 of the life of the loan and be charged a hefty interest rate of 5.01% APR.

For more housing news, visit Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit

“The book is Escaping Condo Jail by Sara Benson and Don DeBat. I would say that anybody thinking about buying a condo, or even anybody serving on a condo board, or anybody who has any connection to a condo, this is must reading—all 600 and something pages. Thanks a lot for a great book!”


Steve Sanders, “Your Money Matters” WGN TV, December 22, 2014

By Don DeBat

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