Today’s mortgage and refinance rates
Average mortgage rates fell again yesterday. That’s great news. But it’s much too soon to treat recent decreases as a trend. It’s possible they’ll turn into one. However, I suspect it’s more likely that these rates will resume rising soon.
What happens to rates next will depend on a pile of things, which I’ll explore below. But I shouldn’t be surprised if mortgage rates next week rise overall.
Current mortgage and refinance rates
|Conventional 30 year fixed||3.082%||3.098%||-0.04%|
|Conventional 15 year fixed||2.415%||2.442%||-0.06%|
|Conventional 20 year fixed||2.878%||2.914%||-0.07%|
|Conventional 10 year fixed||2.347%||2.405%||-0.04%|
|30 year fixed FHA||3.008%||3.765%||-0.12%|
|15 year fixed FHA||2.464%||3.107%||-0.05%|
|5/1 ARM FHA||2.34%||3.051%||-0.05%|
|30 year fixed VA||2.848%||3.038%||-0.05%|
|15 year fixed VA||2.699%||3.048%||-0.03%|
|5/1 ARM VA||2.477%||2.304%||-0.03%|
|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.|
COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.
Should you lock a mortgage rate today?
Whether or not you should lock your mortgage rate today is a tough call. After all, rates have been falling over the last few days.
But this week’s lows are higher than last week’s highs. And there are currently many more reasons why these rates should resume rising, while few are likely to see them fall for much longer.
So my personal 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 be guided by your gut and your personal tolerance for risk.
What’s moving current mortgage rates
When it comes to the stock market, CNBC suggests a list of investor concerns: “The Federal Reserve and interest rates are top of mind, but investors are also going to focus on Covid, the debt ceiling, China’s Evergrande, and inflation.”
We should add to that list employment. And the official, monthly employment situation report will be published next Friday. That will tell us how many new jobs were added to the nation’s nonfarm payroll during September and what the unemployment rate was that month.
This is arguably the most important of all economic reports at the moment. And next Friday’s edition may be even more influential than usual for reasons we’ll get to in a minute. But first, let’s run through CNBC’s list …
These are the things most likely to move markets, including the one for mortgage-backed securities (MBSs), a type of bond that largely determines mortgage rates:
- Federal Reserve — The Fed has signaled that it will very likely begin to wind down (“taper”) its cheap money policies on Nov. 3. These have been largely responsible for the low mortgage rates we’ve been seeing over the last 18 months. And, when it slows its purchases of MBSs from its current rate of $40 billion a month, that’s almost inevitably going to push mortgage rates higher
- Interest rates — The Fed says it currently plans to hike its interest rates (and therefore nonmortgage rates generally) in 2022, earlier than the 2023 date it used to tout. The faster the economic recovery, the sooner those rates are likely to increase
- COVID-19 — Another of the reasons mortgage rates have been so low for the last 18 months is the fear investors have of the economic damage the pandemic might wreak. But, since mid-September, national new infection rates have been falling significantly, alleviating some of those fears
- Debt ceiling — This could turn out to be the biggest threat to low mortgage rates of all. Absent Congress raising the debt ceiling, the US will start defaulting on its debts for the first time ever sometime between Oct. 15 and 18. And that’s likely to trigger a global financial meltdown that will bring higher borrowing costs on all debt, including new mortgages and all adjustable-rate mortgages that are beyond their initial fixed-rate periods
- China’s Evergrande — This huge property company is teetering on the edge of collapse. And its liabilities are $300 billion. If the Beijing government doesn’t rescue it, some are expecting a “Lehman Brothers moment.” You’ll remember that it was the bankruptcy of that American bank that many believe triggered the 2008 credit crunch and the global Great Recession
- Inflation — The latest consumer price index showed those prices rising 5.3% in the year ending in July. It was 5.4% in June. But those months are the highest rates of inflation since 2008. The Fed still believes this inflation is transitory. But each month when inflation rates remain high piles pressure on the Fed to raise its interest rates and slow its cheap money policies more quickly than planned.
Of course, each of those could get worse or better. And so much uncertainty explains why investors are jittery and markets are volatile.
Next week’s employment situation report
The employment situation report for September is due out next Friday, Oct. 8. And the Fed has said that only really bad figures in it are likely to prevent it from tapering its cheap money programs on schedule.
So next Friday’s a crucial day for mortgage rates. But note that even a disappointing or bad report is unlikely to delay that tapering. Because only a disastrous one is likely to deter the Fed from acting on Nov. 3.
Might mortgage rates fall back again?
I’ve been saying since mortgage rates started to rise that we’ll see days and periods when they fall. But I doubt that they’ll fall back in a significant or sustained way anytime soon.
Of course, that’s not impossible. There’s an ever-present risk of some unexpected disaster coming out of nowhere that plunges us into an economic meltdown or something close. And that would likely lead to lower mortgage rates.
But such a disaster is currently improbable. And you certainly shouldn’t base your decision on whether or not to lock your rate on such a wildly unlikely event.
Economic reports next week
By far the most important economic report next week is Friday’s employment situation one. And we’ve already covered that, above.
None of the other economic reports listed below is likely to cause much movement in markets unless it includes shockingly good or bad data:
- Monday — August factory orders
- Tuesday — September Institute for Supply Management (ISM) services index
- Wednesday — September ADP employment. Sometimes, this is seen as a bellwether for Friday’s much more important, official employment report
- Thursday — Weekly new claims for unemployment insurance to Oct. 2. Again, sometimes perceived as a bellwether for the following day’s employment report
- Friday — September employment situation report, including nonfarm payrolls, unemployment rate and average hourly earnings
Watch out for Friday!
Mortgage interest rates forecast for next week
I’m expecting mortgage rates to rise again next week overall. But the week may well begin with falls. And, if you read all the above, you can see the level of uncertainty that surrounds markets. So no prediction I can make is much better than a guess.
Mortgage and refinance rates usually move in tandem. And a gap that had grown between the two has been largely eliminated by the recent scrapping of the adverse market refinance fee.
And another regulatory change, announced this week, 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, it’s 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) you’ll be quoted. 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, Oct. 02 & Rate Forecast For Next Week is written by Peter Warden for themortgagereports.com