Mortgage and refinance rates today, May 6, and rate forecast for next week

Today’s mortgage and refinance rates

Average mortgage rates nudged higher yesterday. But they ended the week lower than they started it.

There’s no point in my hazarding a guess as to what will happen to mortgage rates next week. Arguably the most influential economic report of all is due next Wednesday. It will likely determine the direction those rates take. And I have no way of knowing what it will say.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

The outlook for mortgage rates grew even cloudier this week. I’m still hoping for further falls and think that’s probably the more likely scenario.

But there are real and present dangers that could suddenly force mortgage rates sharply higher. So, if you prefer not to take that risk, you should consider locking your rate soon.

Still, for now, my personal rate lock recommendations remain:

• LOCK if closing in 7 days
• LOCK if closing in 15 days
• FLOAT if closing in 30 days
• FLOAT if closing in 45 days
• FLOAT 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 own tolerance for risk help guide you.

What’s moving current mortgage rates

Last week

This isn’t an easy time to be watching mortgage rates. We’re seeing relatively sharp ups and downs that can look scary or reassuring. But those have tended to cancel each other out. And these rates haven’t really traveled far at all.

Take this week as an example. We had an appreciable rise the day before the Federal Reserve announced its interest rate hike. And then a couple of good days when that hike was as expected and when the central bank signaled that it might pause future rate increases.

The week ended yesterday with a surprisingly modest rise, given that the jobs report showed a stronger-than-expected labor market in April. Overall, mortgage rates were a little lower this Friday evening than seven days earlier.

Next week

Last week’s jobs report vies with the consumer price index (CPI) for the title of the most influential monthly economic report. And April’s CPI lands next Wednesday.

Expect some volatility in mortgage rates and other markets before the report’s publication as investors lay bets on what it will say. They’ll mostly base their betting strategies on economists’ consensus forecasts.

And that means that the difference between those forecasts and the report’s actual numbers is more crucial than the gap between those actuals and the previous month’s figures.

On Friday evening, according to Comerica Bank, the consensus forecasts for Wednesday’s CPI for April were:

• CPI year over year — Flat at 5%
• CPI month over month — Up to 0.4% from March’s 0.1%
• Core CPI (excl. food and energy prices) year over year — Down to 5.5% from March’s 5.6%
• Core CPI month over month — Down to 0.3% from March’s 0.4%

If Wednesday’s actual figures match those forecasts, mortgage rates may barely move. But if inflation’s higher than expected, those rates will likely rise. Conversely, if it’s lower, they’ll probably fall.

Thursday’s producer price index (PPI) is much less important than the CPI. But investors may still pay attention to it because it measures price changes earlier in the supply chain. And that means changes this month are likely to be reflected in future CPIs.

Hopes and fears

Banking crises

Banking crises are generally good for mortgage rates. They tend to drag those rates lower.

And don’t assume those crises are in the rearview mirror. Every time one seems to be put to bed, one or two more soon crop up.

So far, regulators and the wider banking sector have successfully resolved issues surrounding failing banks. But there’s a chance the industry could turn into a Whack-a-Mole stand.

Debt limit

The looming debt limit is the potential disaster to lose sleep about. If Congress doesn’t raise the debt ceiling within a matter of weeks, we could be looking at an economic catastrophe.

The urgency of a resolution stepped up earlier this week when Treasury Secretary Janet Yellen predicted the federal government could have to stop paying some of its bills and salaries as early as June 1. Previously, many of us had expected the crunchtime (aka “X-date”) to arrive in late summer or early fall.

Meanwhile, on May 3, the White House economics team published its assessment of the implications of the debt ceiling being reached and the problem being unresolved for a prolonged period. That team reckons 8 million jobs could be lost and that the value of U.S. stock markets could plummet by 50%.

Hitting the debt limit would likely send all interest rates — including mortgage rates — skyrocketing, perhaps for many months or years. True, they’d probably return to earth ultimately as a result of the ensuing recession or depression. But the pain in the meantime could be acute and chronic.

Economic reports next week

I covered next week’s two biggest economic returns in a previous section, above. They’re the consumer price index (CPI) and producer price index (PPI).

Those reports that are potentially important for mortgage rates are shown in bold in the following list. The others rarely move those rates far unless they contain shockingly good or bad data.

• Tuesday — April small business optimism index from the National Federation of Independent Business
• Wednesday — April consumer price index.
• Thursday — April producer price index. Plus initial jobless claims for the week ending May 6
• Friday — May consumer sentiment index

Wednesday is by far the most important day next week.

Time to make a move? Let us find the right mortgage for you

Mortgage interest rates forecast for next week

What happens to mortgage rates next week will pivot on Wednesday’s consumer price index. And, as I don’t know what that will say, I can’t make a sensible prediction about those rates.

Still, further ahead, I’m still hopeful that mortgage rates could fall back appreciably. However, that wholly depends on whether the debt limit crisis is averted.

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 inflation rates can undermine those tendencies.

Your part

But you play a big part in determining your own mortgage rate in five ways. And you can affect it significantly by:

1. Shopping around for your best mortgage rate — They vary widely from lender to lender
2. Boosting your credit score — Even a small bump can make a big difference to your rate and payments
3. Saving the biggest down payment you can — Lenders like you to have real skin in this game
4. Keeping your other borrowing modest — The lower your other monthly commitments, the bigger the mortgage you can afford
5. 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 rate 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:

Down payment assistance programs in every state for 2023

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.