Today’s mortgage and refinance rates
Average mortgage rates jumped sharply yesterday. Add that to Thursday’s appreciable rise and they’re suddenly back to their pre–pandemic levels. Indeed, if you have fair credit or some other small negative on your application, you may already have a mortgage rate above 4%.
Often after sharp rises, markets pause and rates plateau or dip a little. That could happen over the coming seven days or it may come a bit later. But my guess is that mortgage rates next week might edge higher.
Current mortgage and refinance rates
|Conventional 30 year fixed||3.98%||4.001%||+0.12%|
|Conventional 15 year fixed||3.096%||3.126%||-0.1%|
|Conventional 20 year fixed||3.725%||3.759%||+0.2%|
|Conventional 10 year fixed||3.199%||3.264%||+0.09%|
|30 year fixed FHA||4.023%||4.83%||+0.08%|
|15 year fixed FHA||3.284%||3.944%||+0.13%|
|30 year fixed VA||3.891%||4.091%||-0.09%|
|15 year fixed VA||2.888%||3.215%||-0.44%|
|5/1 ARM VA||4.17%||3.454%||+0.15%|
|Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.|
Should you lock a mortgage rate today?
There’s still plenty of volatility around in key markets. And that makes them unpredictable.
But the fundamentals that caused mortgage rates to rise this week (more on those below) look set to endure. And I’m expecting any falls in those rates – when markets take a customary break after sharp movements – to be relatively brief and shallow.
Overall, I suspect that mortgage rates will continue to drift slowly higher. Of course, there will still be days and longer periods when they fall. Because that’s how markets work. But I reckon they’re almost certainly on a gentle upward trend.
And my personal rate lock recommendations remain:
- LOCK if closing in 7 days
- LOCK if closing in 15 days
- LOCK if closing in 30 days
- LOCK if closing in 45 days
- LOCK if closing in 60 days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine – or better. So let your gut and your personal tolerance for risk help guide you.
What’s moving current mortgage rates
Last week, I wrote, “January hasn’t been a kind month for mortgage rates. According to Mortgage News Daily’s archive, those for 30–year, fixed–rate mortgages (FRMs) closed at 3.27% on New Year’s Eve. Yesterday evening [Jan. 28], they closed at 3.69%.”
Well, so far, February’s been even less friendly to those rates. And, yesterday evening [Feb. 4], they closed at 3.85%.
Still, something else I wrote last week remains valid: “Of course, three years ago, in January 2019, they stood at 4.46%, according to Freddie Mac’s monthly archive. So keep things in perspective.”
But, undeniably, up until now, 2022 has been a very bad time to be floating your mortgage rate for any longer than necessary. And I doubt things will get much better anytime soon.
We’ve been discussing the fundamental drivers of higher mortgage rates for some time. The main three are:
- Inflation – Currently running at 7%
- The Federal Reserve’s plans to counter inflation – More below
- A booming economy – No matter what your favorite news sources may tell you, the economy is doing really well – as I reported on Wednesday
All of those act to push up mortgage rates and they often interact with each other. What partly caused this week’s sharp rises was remarkable employment data yesterday that far exceeded expectations, in spite of the Omicron variant’s effects.
Not only did those jobs numbers underscore the strength of the economic boom, but they might also have changed the Fed’s plans for countering inflation. The central bank has twin overriding goals. Namely, to:
- Keep inflation as close as possible to 2%
- Maintain good levels of employment
Last year, it chose to focus on employment, which was at risk owing to COVID–19. And it believed that inflation was transitory and was likely to disappear on its own soon enough.
Now, it turns out that employment is recovering nicely on its own and that it’s inflation that’s the big issue. And the Fed might see yesterday’s employment data as permission to act even more aggressively against inflation than it planned.
Those plans already included a number of hikes to its interest rates over the rest of the year, starting in March. Many assumed there would be three or four of those, each raising rates by 0.25%.
Fed to push mortgage rates higher, sooner?
But, last month, Fed Chair Jerome Powell declined to rule out a hike following each of the seven remaining meetings of its monetary policy committee scheduled for 2022. And, yesterday, commentators began to wonder whether that March increase might be 0.5% in the wake of those excellent jobs numbers.
Meanwhile, the Fed could also decide to throw into reverse earlier its asset purchasing programs. It’s already running down the two–year one that’s been keeping mortgage rates artificially low. It pushed them lower by buying $1 trillion+ of mortgage–backed securities. Those MBSs are the type of bond that largely determine mortgage rates.
Following yesterday’s employment data, will the Fed start selling MBSs earlier than planned? If it does, that would add significant upward pressure to mortgage rates, perhaps as soon as March. Or earlier, if investors see the move coming.
Of course, the future’s never certain. And something spectacularly terrible could come along that changes everything and sends mortgage rates plummeting. After all, that’s what COVID–19 did two years ago. But, absent something of that magnitude, it’s hard to see low mortgage rates surviving for long.
Economic reports next week
This week’s economic reports were mostly about employment data. Next week’s are mostly about inflation.
Watch out for Thursday, which brings both the consumer price index (CPI), and core CPI, from which volatile food and energy prices have been stripped out.
The most important reports, below, are set in bold. The other is unlikely to move markets much unless they contain shockingly good or bad data.
- Thursday – January consumer price index and core CPI. Plus weekly new claims for unemployment insurance to Feb. 5
- Friday – February consumer sentiment index
It’s a slow week, except for Thursday’s CPI.
Mortgage interest rates forecast for next week
Markets often take breathers after moving sharply. And it’s quite possible we’ll see a plateauing or some small falls for mortgage rates next week. But, on balance, I suspect we’re more likely to encounter further rises, though probably much smaller ones than this week.
Mortgage and refinance rates usually move in tandem. And the scrapping of the adverse market refinance fee has largely eliminated a gap that had grown between the two.
Meanwhile, another recent regulatory change has likely made mortgages for investment properties and vacation homes more accessible and less costly.
How your mortgage interest rate is determined
Mortgage and refinance rates are generally determined by prices in a secondary market (similar to the stock or bond markets) where mortgage–backed securities are traded.
And that’s highly dependent on the economy. So mortgage rates tend to be high when things are going well and low when the economy’s in trouble.
But you play a big part in determining your own mortgage rate in five ways. And you can affect it significantly by:
- Shopping around for your best mortgage rate – They vary widely from lender to lender
- Boosting your credit score – Even a small bump can make a big difference to your rate and payments
- Saving the biggest down payment you can – Lenders like you to have real skin in this game
- Keeping your other borrowing modest – The lower your other monthly commitments, the bigger the mortgage you can afford
- Choosing your mortgage carefully – Are you better off with a conventional, FHA, VA, USDA, jumbo or another loan?
Time spent getting these ducks in a row can see you winning lower rates.
Remember, they’re not just a mortgage rate
Be sure to count all your forthcoming homeownership costs when you’re working out how big a mortgage you can afford. So focus on your “PITI.” That’s your Principal (pays down the amount you borrowed), Interest (the price of borrowing), (property) Taxes, and (homeowners) Insurance. Our mortgage calculator can help with these.
Depending on your type of mortgage and the size of your down payment, you may have to pay mortgage insurance, too. And that can easily run into three figures every month.
But there are other potential costs. So you’ll have to pay homeowners association dues if you choose to live somewhere with an HOA. And, wherever you live, you should expect repairs and maintenance costs. There’s no landlord to call when things go wrong!
Finally, you’ll find it hard to forget closing costs. You can see those reflected in the annual percentage rate (APR) that lenders will quote you. Because that effectively spreads them out over your loan’s term, making that higher than your straight mortgage rate.
But you may be able to get help with those closing costs and your down payment, especially if you’re a first–time buyer. Read:
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The result is a good snapshot of daily rates and how they change over time.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.