Today’s mortgage and refinance rates
Average mortgage rates edged lower yesterday. And, following on from a consistent upward trend since January, there have been only two modest rises so far in April.
But is this period of falls sustainable? Many doubt it. In Friday’s Wall Street Journal, Michael S. Derby suggested, “It may not last.” The trouble is, nobody knows when it might end. So, once again, I have to forecast that mortgage rates next week are unpredictable.
Sorry! The last three weeks have been the only times I haven’t had a clue what to expect — and so have been forced to be so vague. Read on for my reasons.
Current mortgage and refinance rates
|Conventional 30 year fixed||2.983%||2.988%||Unchanged|
|Conventional 15 year fixed||2.156%||2.273%||+0.03%|
|Conventional 20 year fixed||2.75%||2.842%||+0.03%|
|Conventional 10 year fixed||1.906%||2.092%||+0.03%|
|30 year fixed FHA||2.733%||3.39%||-0.01%|
|15 year fixed FHA||2.379%||2.963%||-0.1%|
|5 year ARM FHA||2.5%||3.207%||Unchanged|
|30 year fixed VA||2.375%||2.547%||Unchanged|
|15 year fixed VA||2.25%||2.571%||Unchanged|
|5 year ARM VA||2.5%||2.386%||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 my rate lock recommendations (below) are set on Lock. And that’s because I’m pretty sure that mortgage rates will rise again soon. Unfortunately, nobody has much of an idea when. Read the next section to learn what’s moving current mortgage rates.
But just because I’m recommending locking your rate doesn’t mean you should do so as long as rates continue to fall. What you can do is hold off until they begin to rise again, which may be next week, next month or possibly even later.
But, if you do that, be sure to check with your lender that you’ll be able to lock almost instantly when you decide to push the button. And keep a daily watch on how mortgage rates are moving. Because they could rise quickly when the time comes.
Still, my overall 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
The current falls in mortgage rates are all about investor sentiment. On April 21, The Wall Street Journal reported:
Many investors remain upbeat about the outlook … but are growing concerned that a rise in coronavirus cases globally could delay plans to reopen economic activity.
And therein lies the problem. The domestic economy is exceptionally buoyant, with economic reports pointing to the rest of this year being very bright. Indeed, the Federal Reserve is forecasting for 2021 the fastest growth since Ronald Reagan was in the Oval Office.
All of those are drivers that would normally push mortgage rates much higher fairly quickly. But that hasn’t been happening in April, partly (now mostly) because of fears of the damage COVID-19 might be doing overseas. After all, the US is still very much a trading nation and needs foreign partners to keep its economy healthy.
I still think it’s likely that investors will soon be forced to recognize the buoyancy of the domestic economy and will conquer their foreign fears. Even some relatively poor countries are ramping up their vaccination programs quickly. And there’s hope that the pandemic will be defeated globally during 2022.
If I’m right, mortgage rates should resume their upward trend sometime soon — perhaps sharply. But, if I’m wrong, they could continue to drift down. And if a new vaccine-resistant variant of the virus emerges, they could tumble.
How do you see the odds for each of those scenarios?
Economic reports next week
It’s almost not worth telling you about the economic reports on next week’s calendar. Recently, markets have either ignored them or actually reacted in the opposite way to normal.
Still, I’ll list them for the sake of consistency. Just remember how difficult it currently is to interpret their effects on mortgage rates.
So here are next week’s main economic reports:
- Monday — March durable goods orders
- Tuesday — Case-Shiller home price index for February. Plus April’s consumer confidence index
- Wednesday — Federal Reserve news conference (see below)
- Thursday — First reading of gross domestic product (GDP) for the first quarter of 2021. Plus weekly new claims for unemployment insurance.
- Friday — Personal income, consumer spending and core inflation for March. Plus April’s final consumer sentiment index
The Fed’s key policy body, the Federal Open Market Committee (FOMC), meets on Tuesday and Wednesday. And key documents and forecasts will be released at 2 p.m. (ET) on Wednesday. They’re followed by a news conference at 2:30 p.m. (ET). Markets take these very seriously and they may be the biggest movers of mortgage rates next week.
Typically, markets react to unexpectedly good news with higher mortgage rates. You usually see lower rates if figures are bad. But that’s not necessarily been the case recently. And it takes a lot to move them far.
Mortgage interest rates forecast for next week
For a third week, I have to say that mortgage rates are essentially unpredictable at the moment. I hope my earlier explanations of what’s going on earn me your forgiveness.
Mortgage and refinance rates usually move in tandem. But note that refinance rates are currently a little higher than those for purchase mortgages. That gap’s likely to remain fairly constant as they change.
Meanwhile, a recent regulatory change has made most mortgages for investment properties and vacation homes more expensive.
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. 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 end result is a good snapshot of daily rates and how they change over time.