Today’s mortgage and refinance rates

Average mortgage rates Inched up again yesterday. And they’re appreciably higher than they were a week ago.

I suspect mortgage rates might gently rise next week. Some falls had been a possibility in response to Russia’s invasion of Ukraine. But those didn’t materialize. And, if even such a momentous event can’t drag these rates lower, why should we expect lesser things to do so?

Current mortgage and refinance rates

Program Mortgage Rate APR* Change
Conventional 30 year fixed 4.118% 4.141% -0.04%
Conventional 15 year fixed 3.492% 3.528% -0.02%
Conventional 20 year fixed 3.992% 4.028% -0.03%
Conventional 10 year fixed 3.462% 3.532% Unchanged
30 year fixed FHA 4.258% 5.024% -0.06%
15 year fixed FHA 3.746% 4.37% -0.04%
30 year fixed VA 4.181% 4.389% -0.09%
15 year fixed VA 3.375% 3.706% Unchanged
5/1 ARM VA 4.75% 3.926% Unchanged
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?

I was surprised that markets were so quick to shrug off Russia’s full–scale invasion of Ukraine. True, mortgage rates edged lower on one day this week. But, overall, investors seem to think the threat the war poses to the global economy is small. Read on to discover why they might be wrong.

Still, for now, the outlook remains bleak for mortgage rates. Yes, we’re likely to see small and occasional falls. But, overall, the recent upward trend is looking almost wholly intact.

So 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

Ukraine and the global economy

Markets are not concerned with the morality of war. They focus exclusively on its impact on the global economy.

And they seem to have decided that the war in Ukraine poses little threat to that, even though Russia exports about 10 million barrels of oil each day. And they’re equally unperturbed by the sanctions being imposed by the international community.

Threat

Of course, that could change. And some still think the threat is considerable. Yesterday, I quoted from The Financial Times: “Soaring energy prices alone could tip the world into a second recession in three years.”

And, also yesterday, The Wall Street Journal (paywall) echoed that concern, though it didn’t predict a recession:

Russia’s invasion of Ukraine threatens to restrict global energy supplies, with the resulting rise in oil and natural–gas prices likely to hit Europe hard and potentially ripple out to the U.S. and other global markets. It’s the last thing the global economy needs: Another “supply shock,” or a sudden shortage of key products – in this case oil, natural gas and other commodities – that is likely to exacerbate a global inflation problem and make matters harder for the Federal Reserve and other central banks, which are trying to prevent consumer prices from rising out of control.

— Wall Street Journal, “Ukraine War Means Another Supply Shock to Global Economy, the Last Thing It Needs,” Jan. 25, 2020

I’ve been suggesting something similar since the Ukrainian situation began to look serious. But investors don’t seem to be buying that narrative, at least for now.

What if there’s a recession?

However, all that could change if events unfold in the ways the FT predicts. A recession could well force the Fed’s hand and make it act less aggressively against inflation. And that would probably see mortgage rates fall.

But, if the Journal is correct (it quotes a source that “doesn’t see recession resulting”), mortgage rates might rise. Because higher oil prices without a recession would keep up pressure on the Fed to act decisively to counter inflation.

And that pressure is already strong. Yesterday’s Commerce Department personal income and outlays report showed consumer inflation increasing 6.1% in January compared with a year earlier. And that was the sharpest rise in 40 years. The Fed pays special attention to that particular report.

Mortgage rates soon

As long as markets remain cool over the economic implications of the war in Ukraine, we’ll likely see gently rising mortgage rates. And that war could push them yet higher if it feeds inflation without creating a recession.

So the main hope for lower mortgage rates is a recession. And none of us wants one of those. It’s an unfortunate fact that wishing for lower mortgage rates almost always involves wishing for a worse economy.

Economic reports next week

Yet again, it’s Friday that sees the most important economic report next week. That’s the official, monthly employment situation report. And this is another one that greatly influences the Fed.

If employment is strong, as it has been recently, then the central bank is free to focus wholly on fighting inflation. And its planned countermeasures are very likely to drive mortgage rates higher.

Senior Fed officials will be speaking in public every day next week. And expect markets to pay attention to them even more closely than usual.

The potentially most important reports, below, are set in bold. The others are unlikely to move markets much unless they contain shockingly good or bad data.

  • Tuesday – February Institute for Supply Management (ISM) manufacturing index. Plus construction spending for January
  • Wednesday – February ADP employment report, sometimes seen as a bellwether for Friday’s official report
  • Thursday – February ISM services index. Plus weekly new claims for unemployment insurance to Feb. 26
  • Friday – February employment situation report, including nonfarm payrolls, unemployment rate and average hourly earnings

Of course, markets may barely pay any attention to most economic reports next week as they focus on Ukraine. But the employment situation report could be an exception if it contains unexpected information.

Mortgage interest rates forecast for next week

Unless markets change their view of the war in Ukraine or Friday’s employment situation report turns out to be sensational, I’m expecting that mortgage rates might drift gently higher next week.

Mortgage and refinance rates usually move in tandem. And the scrapping of the adverse market refinance fee last year 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.

Your part

But you play a big part in determining your own mortgage rate in five ways. And you can affect it significantly by:

  1. Shopping around for your best mortgage rate – They vary widely from lender to lender
  2. Boosting your credit score – Even a small bump can make a big difference to your rate and payments
  3. Saving the biggest down payment you can – Lenders like you to have real skin in this game
  4. Keeping your other borrowing modest – The lower your other monthly commitments, the bigger the mortgage you can afford
  5. Choosing your mortgage carefully – Are you better off with a conventional, conforming, 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:

Down payment assistance programs in every state for 2021

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.



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