30 Year Fixed Mortgage Rate  

A 30 year fixed mortgage rate is a mortgage loan that has an interest rate that stays the same for the 30-year life of the loan. Rates on 30 year fixed mortgages are currently at historic lows, running around the 5.5% mark.

Why are 30 year fixed mortgage rates beneficial? Many who took out adjustable rate mortgages during the housing boom started out with low monthly payments, but an adjustable rate mortgage will go up according to the economic index. This is the scenario that in many cases led to the subprime lending crisis; ARMs ballooned and homeowners were unable to make their mortgage payments.

For most home buyers who plan on living in their houses for several years, a 30 year fixed mortgage rate is the safest, most stable and most fiscally responsible choice. A consumer who takes out a 30 year fixed mortgage loan of 200,000 at a rate of 5.56 percent with a 20 percent down payment will pay the same amount monthly - approximately $1,120 - for the life of the loan. Compare this to an adjustable rate mortgage. A 200,000 loan could see payments go as high as $1,500 as the loan progresses.

Mortgage rates have changed a lot. Just six months ago the average rate for a 30 year fixed mortgage rate was more than 6.2 percent. Over the years, 30 year fixed mortgage rates have bounced all over the charts, with rates in the late 1990s over 8 and 9 percent, and in 2000 and 2001 ranging around 7 percent. In the early 1980s, 30 year fixed mortgage rates ranged closer to 15, 16 and 17 percent! Rates have been dropping steadily, with the beginning of 2009 showing nearly historic low rates.

What determines the 30 year fixed mortgage rate? A variety of factors. Investor demand, economic factors, inflation. A good benchmark is U.S. Treasury bonds. Since a 30 year fixed mortgage is generally more likely to have a term of about 10 years, the 10 year Treasury bond is a decent benchmark. Of course, mortgages carry a slightly higher risk factor than government bonds, so the rate tends to be a bit higher.

Obviously, a 30 year fixed mortgage rate is the safe, smart way to go for responsible homeowners looking to actually live in a home. Especially in today's economy it's smart to know what your monthly bills will be. Good luck!