Today’s mortgage and refinance rates
Average mortgage rates rose appreciably yesterday. But that didn’t reflect the week, which was a good one for those rates. Not great, but good.
Last week, I wrote, “Often after such mayhem, markets pause and mortgage rates fall, though rarely by enough to make much difference to struggling borrowers.” That was right, but I was unsure about its timing and called last week wrongly. Today, I’m back to predicting that mortgage rates might rise next week. However, it’s perfectly possible markets aren’t yet done with falls.
Current mortgage and refinance rates
|Conventional 30 year fixed||4.874%||4.898%||+0.1%|
|Conventional 15 year fixed||4.126%||4.163%||+0.07%|
|Conventional 20 year fixed||4.827%||4.86%||+0.12%|
|Conventional 10 year fixed||4.022%||4.096%||-0.01%|
|30 year fixed FHA||5.016%||5.822%||+0.11%|
|15 year fixed FHA||4.387%||4.95%||+0.07%|
|30 year fixed VA||4.701%||4.915%||+0.03%|
|15 year fixed VA||4.464%||4.805%||+0.33%|
|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, though that wasn’t the case last week.
During the week, I was saying that it was too soon to read much into daily falls in mortgage rates. And, this morning, I have to say the same about yesterday’s rise. It takes a long time to identify a trend, and a few days of decreases or increases mean nothing.
The current trend has been upward since January 2021 and sharply upward since last August. And I don’t expect that trend to reverse anytime soon. Of course, I might be wrong. But, to me, the best-case scenario is that increases moderate so that mortgage rates just drift gently higher for at least the rest of this year.
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
This week has been kind to mortgage rates. But let’s not forget that the previous one saw the sharpest rises over seven days in nearly 40 years.
And, thanks to Friday’s increase, this week’s falls didn’t do as much good as they seemed to be doing at the time. Mortgage News Daily’s archives say the average 30-year, fixed-rate mortgage (FRM) rate stood at 4.95% last Friday (3/25) evening and at 4.88% at the same time yesterday.
Now, 7 basis points (4.95% – 4.88% = a 7-basis-point difference) is usually a nice fall over one week. But last Friday’s (not yesterday’s) single-day rise was 24 basis points. As I suggested yesterday, leave the Champagne in the refrigerator.
It may well be that we’ll see further falls next week. But I wouldn’t bank on that. And I certainly wouldn’t expect any significant and sustained falls anytime soon.
“It’s still the Federal Reserve, stupid!”
Why did mortgage rates rise yesterday? Well, it was primarily down to good employment data published that morning. Those good numbers in themselves would normally be enough to push those rates higher.
But, yesterday, they fed into other considerations. Comerica Bank’s chief economist explained:
Robust job growth in the March report will stiffen the Fed’s resolve to normalize monetary policy in a hurry. Comerica Economics forecasts for the Fed to raise the federal funds rate by half a percentage point at both of their next two meetings, in early May and mid-June.
And The Wall Street Journal (paywall) concurred:
Friday’s employment figures underscore the urgency Federal Reserve officials feel to quickly withdraw economic stimulus by raising interest rates in potentially larger intervals in the coming months.
The federal funds rate is the Federal Reserve’s target rate at which banks lend to and borrow from each other overnight. And, because banks tend to be uber safe, that rate is very low: between 0% and 0.25% until recently.
But variable rates on many sorts of borrowing are tied to that rate. And, when the Fed hikes it, it’s likely rates on your credit cards, auto loans and any personal loans you have will go up.
Mortgage rates (except those on existing adjustable-rate mortgages (ARMs)) don’t work that way. But Fed rate hikes certainly tend to have a knock-on effect on rates for new mortgages and refinances.
The Fed and mortgage bonds
Rates for those new mortgages and refinances are determined mainly by yields on mortgage bonds, called mortgage-backed securities (MBSs). At the start of the pandemic, the Fed began buying those MBSs to drive mortgage rates artificially lower. And, by last Wednesday, its total holdings of those were worth $2.72 trillion.
The Fed has already announced that it intends to start selling those soon. And it’s promised to unveil its plan for those sales on May 4.
You won’t get a Nobel Prize in economics for working out that if buying MBSs pushed mortgage rates down, selling them is likely to push them higher. And, when Comerica Bank said the Fed was resolved “to normalize monetary policy in a hurry,” it meant selling MBSs faster, too.
Is the worst behind us?
So things look bad for mortgage rates. But there’s a glimmer of hope in the gloom.
The Fed’s been wildly signaling its intentions for months. And that’s given markets plenty of time to price in likely changes. So, with luck, the worst of the pain for mortgage rates is behind us.
The main risk is that markets have been underestimating just how aggressively the Fed will offload its MBSs. If reality is worse than expected, we might see yet higher mortgage rates. But, if it is better, those rates might catch a break for a while.
More Fed stuff
If you’re wondering why the Fed is acting this way, it’s because it urgently needs to reduce inflation. And hiking rates and selling assets (including MBSs) are proven ways to cool that.
As you can imagine, investors are even more obsessed with the Fed’s plans than ever. And next Wednesday brings the publication of the minutes of the last meeting of its monetary policy body, the Federal Open Market Committee (FOMC). If they reveal anything significant about the Fed’s current thinking, that could send mortgage rates climbing or tumbling that day, depending on what’s new.
Economic reports next week
Next week’s economic reports are relatively unimportant. And the event most likely to move mortgage rates is Wednesday’s release of FOMC minutes (see the last paragraph).
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 —February factory orders and core capital equipment orders
- Tuesday — March Institute for Supply Management (ISM) services index
- Wednesday — FOMC minutes
- Thursday — Weekly new claims for unemployment insurance to April 2
Watch out for Wednesday!
Mortgage interest rates forecast for next week
It’s almost impossible to predict the coming week’s mortgage rates amid the current volatility. And we might yet see this week’s falls resume.
But, on balance, I’d guess that mortgage rates might rise next week. If they don’t then, I’d expect them to do so soon.
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.
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, 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:
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.