Today’s mortgage and refinance rates
Average mortgage rates moved higher again yesterday. Of course, those remain exceptionally low by almost any historical standards. But they’ve been heading upward for months now.
And I suspect that mortgage rates might climb again next week. Because the forces that have been pushing them higher (see below) remain potent. And momentum still seems strong. However, periods of falls are inevitable, and I can’t rule out one over the next seven days.
Current mortgage and refinance rates
|Conventional 30 year fixed||3.309%||3.327%||-0.01%|
|Conventional 15 year fixed||2.657%||2.685%||+0.01%|
|Conventional 20 year fixed||3.115%||3.148%||-0.01%|
|Conventional 10 year fixed||2.587%||2.646%||+0.02%|
|30 year fixed FHA||3.323%||4.087%||+0.02%|
|15 year fixed FHA||2.64%||3.284%||+0.02%|
|5/1 ARM FHA||2.765%||3.23%||-0.01%|
|30 year fixed VA||3.17%||3.364%||Unchanged|
|15 year fixed VA||2.836%||3.186%||+0.04%|
|5/1 ARM VA||2.606%||2.45%||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.|
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?
All mortgage rates have been rising for several weeks. And, for the most common types of loans, the turning point was Aug. 4, with sharper rises since Sept. 15.
Of course, the Freddie Mac graph from which that information was drawn shows some falls since those dates. But only brief and shallow ones. And you have to go back to April 7 to see higher rates than current ones.
So, yes. If I were you, I would lock my rate today. Because, unfortunately, there’s little sign of the upward trend ending soon.
Read on to discover the drivers that are pushing these rates higher. And why they’re unlikely to go away anytime soon.
Anyway, 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
What are the forces currently pushing mortgage rates higher? They’re the same as the three that have been doing so for several weeks. So, if you’re a regular reader and know those by heart, you can skip this section.
Still reading? Well, those forces are:
1. The Federal Reserve’s imminent actions
Pretty much everyone expects the Federal Reserve to announce on Nov. 3 that it will be winding down (tapering) its “quantitative easing” (cheap-money) programs. If it does, it will begin the process in mid-November and will aim to fully end the programs by mid-2022.
What’s that got to do with mortgage rates? One of those programs has seen the Fed spend $40 billion every month for the last 19 months on a sort of bond: a mortgage-backed security (MBS). And those MBSs are the main determinant of mortgage rates.
In other words, the Fed has, since the pandemic really set in, been keeping mortgage rates artificially low. Clearly, when it stops doing that, mortgage rates are likely to rise.
Indeed, they probably already are as a direct result of investors anticipating the Fed’s widely signaled intentions. So some of the increases in recent weeks are probably down to investors positioning themselves for the announcement.
Investors in bonds (including MBSs) are highly sensitive to inflation. They’re buying a fixed income over a set period. And if inflation is higher — as it currently is — than the return (“yield”) they can earn, then they’re going to lose money.
So, unsurprisingly, at times like these, they shy away from bonds. And that reduces the price and increases the yields on those bonds. When applied to MBSs, that pushes up mortgage rates.
Many thought that the current rate of inflation would be falling by now. But the latest consumer price index (CPI) showed prices rising at 5.4% year over year. And there’s little sign of that easing in the near term.
So inflation is putting real upward pressure on mortgage rates.
3. Tumbling COVID-19 infection rates
The New York Times (paywall) is one of several newspapers that track data concerning the pandemic. And, on Sept. 13, it reported the recent high in daily reported new cases of COVID-19: 285,058.
But, since then, new cases have been consistently tumbling. So, by yesterday, that number had dropped to 87,344.
Of course, the pandemic is the underlying cause of both the Fed’s quantitative easing program and higher inflation. But a fear of it among investors has also helped to keep mortgage rates low. And, as the threat diminishes, that, too, adds upward pressure on mortgage rates.
Of course, it’s always possible that something huge could come along that’s so terrible that it overwhelms markets and sends mortgage rates tumbling again. But it would have to be something momentous.
A new, highly virulent, vaccine-resistant strain of SARS-CoV-2 (the virus that causes COVID-19) might do it. As could a serious shooting war between the US and China, perhaps over Taiwan. Or a 1929-style stock market collapse.
But, absent an event of that sort of magnitude, higher mortgage rates currently look set to last.
Economic reports next week
Next Thursday’s first reading (out of three increasingly accurate ones) of gross domestic product during the third quarter of 2021 will be watched carefully. And there’s a slew of inflation, income and spending data due the day after. Meanwhile, there are measures of consumer confidence and sentiment scheduled for next Tuesday and Friday.
But none of the other economic reports listed below is likely to cause much movement in markets unless it includes shockingly good or bad data:
- Tuesday — October consumer confidence index and August S&P Case-Shiller home price index. Plus September new home sales
- Wednesday — September durable goods orders and core capital goods orders
- Thursday — Gross domestic product (GDP), 3rd Quarter 2021 (advance estimate). Plus weekly new claims for unemployment insurance to Oct. 23
- Friday — September core inflation; nominal personal income; real disposable income; nominal consumer spending; real consumer spending. Plus October consumer sentiment index
Some reports next week could move markets.
Mortgage interest rates forecast for next week
Sadly, I suspect that mortgage rates might rise again next week. But we’re likely due a small fall as an adjustment sometime soon. And it’s always possible that could occur over the next seven days. Just be aware that, in my view, higher mortgage rates overall during the coming weeks are more than likely.
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 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, 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. 23 & Rate Forecast For Next Week is written by Peter Warden for themortgagereports.com