Today’s mortgage and refinance rates
Average mortgage rates yesterday climbed exceptionally quickly. And what had been a modestly bad week for those rates was turned into a truly terrible one. Read on for the grisly details.
Mortgage rates often retreat after an unusually sharp change. And I shouldn’t be surprised if they were to fall back a bit next Monday and Tuesday, though don’t expect them to regain all or even most of yesterday’s losses. From next Wednesday onward, where they’ll move is anyone’s guess. Because crucial Federal Reserve announcements (more on those below) are due that day.
Current mortgage and refinance rates
|Conventional 30 year fixed||5.762%||5.785%||+0.11%|
|Conventional 15 year fixed||4.845%||4.875%||+0.18%|
|Conventional 20 year fixed||5.775%||5.812%||+0.21%|
|Conventional 10 year fixed||4.781%||4.866%||+0.11%|
|30 year fixed FHA||5.554%||6.296%||+0.23%|
|15 year fixed FHA||5.07%||5.477%||+0.06%|
|30 year fixed VA||5.019%||5.235%||-0.05%|
|15 year fixed VA||5.622%||5.975%||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.|
Should you lock a mortgage rate today?
Don’t lock on a day when mortgage rates look set to fall. My recommendations (below) are intended to give longer-term suggestions about the overall direction of those rates. So, they don’t change daily to reflect fleeting sentiments in volatile markets.
Last week, I wrote here: “Markets continue to show unusual volatility.” Boy, was that right. The sharpness of yesterday’s rise in mortgage rates wasn’t unprecedented. But it was exceedingly rare.
We might (no guarantees) see some worthwhile falls early next week. But, on Wednesday afternoon, the Federal Reserve will issue a report and host a news conference. And mortgage rates could move in reaction to that. Whether they go up or down will depend on what the Fed says. But I’m guessing significant and sustained falls are unlikely.
And 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
According to Mortgage News Daily’s (MND’s) data, the average rate for a 30-year, fixed-rate mortgage soared by 30 basis points yesterday (a basis point is one-hundredth of 1%). In other words, they jumped from 5.55% to 5.85%. That is genuinely an extraordinary rise in a single day.
That rise was driven by a worse-than-expected consumer price index published yesterday morning. In early May, investors had some grounds for hoping that inflation was leveling off. That’s why mortgage rates dropped for roughly three weeks that month.
But yesterday’s index showed inflation was still climbing — and at its fastest pace in 40 years. Mortgage rates ended the day at their highest point since November 2008, according to MND.
At the front of investors’ minds yesterday was how the Fed would react to the new inflation data. It has a two-day meeting starting next Tuesday. And it will round that off the following day with a statement and projections (2 p.m. (ET)) and news conference (2:30 p.m. (ET)). These events are always followed closely by markets. But I doubt many have been watched more intently than this one will be.
What might the Fed do?
What might bad news look like? Well, the Fed might announce that it will be hiking its rates more often and by bigger amounts. We’re already expecting a 0.5% hike next week and another after its July meeting. Might it pencil in such increases for the three other meetings it will hold this year? Might it even make one or more of those hikes 0.75%? We’ll know next Wednesday.
We’ll also know that day whether yesterday’s inflation report has affected the Fed’s thinking over its holdings of mortgage-backed securities (MBSs) — the type of bond that largely determines mortgage rates. As of last Wednesday, its holdings were worth $2.7 trillion. And that gives it enormous power over those rates.
The Fed’s already said it will reduce its MBS holdings, something that’s likely to exert upward pressure on mortgage rates. But if it speeds up those plans — and perhaps announces that it will begin to start selling MBSs earlier than expected — that could push those rates even higher.
What this means for mortgage rates
Markets are already expecting a tougher Fed line next Wednesday. And yesterday was their pricing in that expectation. If the actual line is less tough than they expect, mortgage rates might fall that day. If they’re roughly in line with those expectations, those rates might barely move.
However, if the Fed proves unexpectedly aggressive, it might be a bad day — and week and month — for those rates. We’re already this morning perilously close to 6% mortgage rates.
Economic reports next week
Next week is likely to be dominated by that Wednesday’s announcements from the Federal Open Market Committee (FOMC), which we discussed in detail in the last section. And that’s likely to overshadow the week’s important economic report, retail sales in May, which is due out only hours before the Fed events.
Naturally, everything inflation-related will catch investors’ eyes. That includes the New York Fed’s inflation projections for the next one and three years, due Monday. And Tuesday’s producer price index.
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 — NY Fed inflation expectations over the coming one and three years
- Tuesday — Producer price index for final demand
- Wednesday — FOMC statement, projections and news conference. Plus May retail sales
- Thursday — May housing starts. Plus, weekly new claims for unemployment insurance to Jun. 11
- Friday — May industrial production index, including capacity utilization
It’s all about Wednesday.
Mortgage interest rates forecast for next week
I shouldn’t be a bit surprised if mortgage rates were to fall next Monday and Tuesday. Such decreases are common — though far from inevitable — after sharp rises such as yesterday’s. Just don’t expect those rates to make up more than a fraction (if any) of their Friday losses.
Next Wednesday and after that is a different story. As explained in detail above, everything will depend on what the Fed says that day.
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.