Today’s mortgage and refinance rates
Average mortgage rates rose appreciably yesterday. The terrible start to 2022 has continued, despite a couple of worthwhile falls. And those rates are back up to their two-year high.
There may be a bit of relief on Monday morning, thanks to friendly moves in markets yesterday that came too late for lenders to adjust their rate cards. But I’m predicting that mortgage rates might move higher next week. Of course, the future’s never certain.
Current mortgage and refinance rates
|Conventional 30 year fixed||3.733%||3.755%||+0.09%|
|Conventional 15 year fixed||3.069%||3.107%||+0.07%|
|Conventional 20 year fixed||3.477%||3.516%||+0.12%|
|Conventional 10 year fixed||3.01%||3.083%||+0.07%|
|30 year fixed FHA||3.786%||4.56%||+0.02%|
|15 year fixed FHA||3.078%||3.729%||+0.04%|
|5/1 ARM FHA||3.574%||3.868%||+0.02%|
|30 year fixed VA||3.65%||3.848%||+0.13%|
|15 year fixed VA||3.229%||3.57%||-0.18%|
|5/1 ARM VA||3.035%||2.832%||+0.1%|
|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 mortgage rate if I were you. Because I believe it’s likely that those rates will continue to drift higher for some time to come — probably several months or longer.
Of course, I might be proved wrong. Nobody can confidently predict the future. But it looks to me as if the forces exerting upward pressure on rates are powerful and sustainable. Unless something momentous arises.
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 guide you.
What’s moving current mortgage rates
How come mortgage rates are rising while the Omicron variant is wreaking havoc with the American and global economies? Surely, they’d normally be falling.
Well, yes. But investors are looking ahead and betting that Omicron will, within a short period, become less prevalent in the US and have left high levels of COVID-19 immunity among the population. Economically, the pain the variant is inflicting now will leave the country much stronger.
This is far from settled science. But we can already see that Omicron typically blows through populations very quickly and that most people experience mild symptoms, if any. Of course, some, sadly, suffer more severely, and relatively few die.
What the UK can tell us about Omicron
The United Kingdom was one of the first advanced nations to be hit by Omicron. It reported its first two cases on Nov. 27, 2021. And, as of yesterday, its number of daily infections had tumbled to 99,652 from 178,250 seven days earlier.
True, its hospitalization and death rates are still rising. But that’s because there are inevitable time lags between getting infected, needing hospitalization and, in relatively rare cases, dying.
Of course, the UK and the US are not directly comparable. The proportion of the UK population that has had two vaccinations or more is noticeably higher than here.
And people in the UK are more densely packed onto their fairly small island, meaning viruses are likely to spread more quickly. America’s population density is 84.2 people per square mile. The UK’s is 679 people per square mile.
But the UK’s experience does seem to support the hypothesis that Omicron will spread quickly through populations and then fade fast. What we can’t yet be sure about is the level of protection an infection provides against further infections by it, other variants and especially any new variants that emerge.
However, early signs are encouraging. And investors don’t appear outrageously optimistic in wagering on the pandemic looking much better in the spring.
Indeed, if everything goes well, we might even be seeing the start of the end of the pandemic. And COVID-19 might soon switch from being a pandemic to an endemic disease, similar to seasonal flu.
Other pressures on mortgage rates
Meanwhile, the forces that are trying to push mortgage rates higher remain strong. Arguably, inflation is the leading one of these.
Earlier this week, we saw the consumer price index hit a high last seen in 1982. And a producer price index that suggests that inflationary pressures are growing stronger rather than weaker. That alone should push mortgage rates higher.
But, also this week, the Federal Reserve made plain that it plans to play hardball with inflation. That could mean four hikes in interest rates this year, each of which would likely impact all variable-rate loans.
Some believe the Fed’s talking big to buy time. But it’s going to have to meet expectations as time goes by.
We already know that the Fed plans to end in March its program that has been keeping mortgage rates artificially low. It achieved that by buying industrial quantities of mortgage-backed securities (MBSs), a type of bond that largely determines those rates.
Now, we face the possibility of that program not just being halted but also thrown into reverse. If the Fed starts to sell some of those MBSs (and its MBS holdings are worth $2.6 trillion) later in the year, mortgage rates could rise significantly.
In the meantime, I’m expecting them to rise fairly gently. However, there’s always the possibility of their falling. It seems unlikely. But some unexpected event of earth-shattering importance just might turn things around.
Economic reports next week
We have a light week for economic reports coming up. And none of the ones listed below is likely to cause much movement in markets unless it includes shockingly good or bad data:
- Tuesday — National Association of Home Builders (NAHB) index
- Wednesday — December building permits and housing starts
- Thursday — December existing home sales. Plus weekly new claims for unemployment insurance to Jan. 15
- Friday — December leading economic indicators
We may be in for a quiet week as far as economic reports are concerned.
Mortgage interest rates forecast for next week
Mortgage rates might rise overall next week. We may be past the worst of the sharp increases. And there’s always the possibility of limited falls.
But I’d be surprised if we saw a week-over-week drop. Having said that, I’m not unused to being surprised.
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.
Mortgage Rates Today, Jan. 15 & Rate Forecast For Next Week is written by Peter Warden for themortgagereports.com