Today’s mortgage and refinance rates

Average mortgage rates climbed yesterday, finishing the week a little higher than they started it. That sounds calm. But there was plenty of volatility: down, up, up, down, up, including some sharp rises and falls.

When markets are that volatile, it usually means there’s a lot of uncertainty around. And that makes predicting the following week’s movements difficult. But the overall trend for months has been an upward one. So I’ll hazard that mortgage rates might rise next week. However, there’s plenty of scope for that to be wrong.

Current mortgage and refinance rates

Program Mortgage Rate APR* Change
Conventional 30 year fixed 5.233% 5.26% +0.1%
Conventional 15 year fixed 4.317% 4.347% +0.05%
Conventional 20 year fixed 5.268% 5.305% +0.13%
Conventional 10 year fixed 4.304% 4.385% +0.09%
30 year fixed FHA 5.278% 6.113% +0.07%
15 year fixed FHA 4.434% 4.735% +0.14%
30 year fixed VA 4.863% 5.076% -0.04%
15 year fixed VA 4.5% 4.842% -0.13%
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’d lock my rate on the first morning when mortgage rates look likely to rise. Recently, that’s been most mornings.

Of course, I can’t be sure that there won’t be more falls ahead. But I doubt they’ll last long. Freddie Mac noted on Thursday: “Mortgage rates have increased 1.5 percentage points over the last three months alone, the fastest three-month rise since May of 1994.”

Of course, that can’t go on forever. And I still hope that rises will moderate soon. But the underlying drivers of higher mortgage rates (see below) still look robust to me. And I rate the chances of sustained falls anytime soon as fairly low.

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

For months, markets have been trying to gauge the likely economic impact of the Federal Reserve’s planned anti-inflationary measures. Investors, analysts and traders pride themselves on looking ahead of events and pricing in likely changes in advance of them.

But the Fed keeps moving the goal posts, ramping up how aggressively it intends to tackle inflation. And that’s left markets scrambling to keep up.

Hence, three weeks ago, we saw the sharpest rise in mortgage rates over seven days in nearly 40 years. And now we know they rose over the last three months more quickly than over any such period since 1994.

At some point, markets will feel they’ve caught up with the Fed’s plans. And that could be soon. But that doesn’t necessarily mean we’ll see sustained falls. Indeed, I suspect we’re more likely to see continuing — although gentler — rises.

Why the Fed is acting this way

The Wall Street Journal (paywall) ran a good article yesterday, explaining what the Fed is up to and why. The main driver is the central bank’s wish to reduce inflation, which is at a 40-year high.

The Fed has two main tools it can use to rein in inflation:

  1. Hiking interest rates — It can increase its own “federal funds rate,” which directly impacts almost all borrowing with variable interest rates. And it indirectly affects mortgage rates
  2. Running down the asset holdings on its balance sheet — These include mortgage-backed securities worth $2.7 trillion. And reducing those holdings directly affects mortgage rates

Unfortunately, in this context, when I say “affects mortgage rates,” I mean pushes them higher.

The Journal article goes on:

When the Fed is trying to cool an overheated economy, as now, it increases the fed-funds rate, reduces its bondholdings and signals that it will do more of the same in the future. Those moves have an especially pronounced effect on mortgage rates.

The 30-year mortgage rate on offer is tethered to the yield on the 10-year Treasury, which is rising in anticipation of future rate increases. What’s more, the Fed’s decision to reduce its holdings of mortgage bonds means issuers must offer higher yields to attract investors — costs that lenders pass on to borrowers in the form of higher interest rates.

I reckon that’s a pretty good summary. And it’s one that will be familiar to regular readers of my daily rates reports.

I’d quibble with just one detail. Mortgage rates tend to have a close relationship with yields on 10-year Treasury notes. But I wouldn’t say they’re “tethered.”

One last thing from that Journal article. When describing the higher borrowing costs so far experienced by homebuyers, the writer ominously suggested “it is only the beginning.”

Economic reports next week

You’ve just read about how central inflation is to the Fed’s plans. So next week’s economic reports on inflation could affect mortgage rates if investors reckon the data are likely to make the central bank act more or less aggressively to cool the economy.

Tuesday’s consumer price index is the critical one. But there are others on Monday and Wednesday.

The other big report next week concerns retail sales in March. Those figures could give clues to how consumers are reacting to high inflation and the general economic environment.

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.

  • Monday — March NY Fed forecasts for inflation over the next year and three years
  • Tuesday — March consumer price index (CPI) and core CPI, which is the index with volatile food and energy prices stripped out
  • Wednesday — March producer price index for final demand, an indicator of future inflation
  • Thursday — March retail sales. And April consumer sentiment index. Plus weekly new claims for unemployment insurance to April 9
  • Friday — March industrial production index and capacity utilization

It’s a big week for sensitive inflation reports. Unfortunately, we should probably expect them to deliver bad news as Russia’s war in Ukraine feeds already high inflationary pressures. If that’s the case, we may see yet higher mortgage rates.

Mortgage interest rates forecast for next week

There’s still too much uncertainty and volatility around to make anything close to a reliable prediction about next week’s mortgage rates.

But, if you hold a gun to my head, I’d guess that mortgage rates might rise 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.



Source link