Mortgage and refinance rates today, Jul. 1, and rate forecast for next week

Today’s mortgage and refinance rates

Average mortgage rates just edged lower yesterday. But Thursday’s significant rise changed the narrative for the week as a whole. And mortgage rates this morning were noticeably higher than they were this time last week.

Next Friday sees the publication of the jobs report for June. For it to rescue mortgage rates, pulling them appreciably lower, the number of new jobs created in June would have to have fallen below the 213,000 currently forecast. In my view, that’s possible but unlikely.

So, my weekly forecast is mortgage rates might remain elevated over the next seven days.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

I’m not expecting mortgage rates to decrease significantly or for long before the fall, and possibly not until late this year or into 2024. That’s not to say a sustained and appreciable drop before then won’t happen. Just that it’s looking unlikely.

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 own tolerance for risk help guide you.

What’s moving current mortgage rates

Back to basics

Let’s review the fundamentals of what drives mortgage rates. Sustained lower mortgage rates are unlikely while:

1. Inflation remains too high
2. The economy remains strong
3. Other interest rates remain elevated

So, how are those doing?

Inflation

There was good news on inflation yesterday. The Wall Street Journal (paywall) reported: “The Fed’s preferred inflation measure, the personal-consumption expenditures price index, rose 3.8% from a year earlier, its lowest reading in two years, the Commerce Department said Friday.”

But there was bad news in the Journal’s article, too. " … the Federal Reserve likely remains on track to raise interest rates in July amid recent signs of healthy economic activity,” it said.

That’s because, while the Fed will — following some nightmare spikes last year — be happy with prices rising by only 3.8% over the previous 12 months, that’s still nearly twice its target inflation rate of 2%.

Strong economy

Thursday’s gross domestic product (GDP) figures for the first quarter showed an amazingly strong economy. Nearly everyone expected to see 1.3% or 1.4% growth that quarter.

But the final figure was 2%. That’s nearly 50% higher than forecasters were expecting.

And that, together with recent jobs reports showing a strong labor market, makes a recession this quarter (which starts today) unlikely. As I wrote last week, “Our best hope for lower mortgage rates is a recession.”

We’ll see next Friday whether the labor market weakened in June. But I doubt it will have done so sufficiently to persuade the Fed not to hike general interest rates when its next announcement’s due on Jul. 26.

Higher general interest rates

And that’s not just my view. The CME FedWatch tool measures the opinions of investors in Fed Funds futures. And, overnight, 86.8% of those investors expected a 25-basis-point (0.25%) hike in general interest rates on Jul. 26.

True, the Fed doesn’t determine mortgage rates directly. But the bond market that does is considerably influenced by the central bank’s rate policy.

Gloomy outlook

So, now you can see why I’m so gloomy about the outlook for lower mortgage rates. Of the three main drivers of those rates, only inflation is looking good — and it’s still far from good enough. And the other two are positively bad.

Personally, I doubt we’ll see a sustained and significant fall in mortgage rates until the fourth quarter of this year at the earliest. And it may be well into 2024 before we do.

However, these things are inherently unpredictable. For example, had last Saturday’s aborted rebellion in Russia turned into a full-blown coup d’état, mortgage rates might have gone into free fall.

And who knows? Maybe something similarly momentous will intervene and immediately make my predictions look silly.

Economic reports next week

Next week is all about employment. And by far the most important publication will be Friday morning’s employment situation report (aka the jobs report) for June.

On Thursday, Comerica Bank said the consensus forecast for nonfarm payrolls (the number of new jobs created that month) was 213,000, down from 339,000 in May. That size fall might help mortgage rates a bit if it happens, but I’m doubtful it will.

There are a few other events during next week that might move mortgage rates, but probably not far. There are a couple of purchasing manager indexes (PMIs), one on each of Monday and Thursday. And the job openings and labor turnover survey (JOLTS) is out on Thursday, too. Meanwhile, the minutes of the last meeting of the Fed’s rate-setting body (the Federal Open Market Committee or FOMC) land on Wednesday.

In the following list of next week’s reports, only those in bold are likely to affect mortgage rates much. The others probably won’t have much impact unless they contain shockingly good or bad data.

• Monday — June PMI from the Institute of Supply Management (ISM) for the manufacturing sector. Plus May construction spending and June vehicle sales
• Tuesday — All markets closed for Independence Day holiday
• Wednesday — FOMC minutes
• Thursday — June ISM PMI for nonmanufacturing sector. May JOLTS. And June ADP employment report. Plus new jobless claims for week ending Jul. 1
• Friday — June employment situation report, including nonfarm payrolls, unemployment rate and average hourly earnings.

Friday’s likely to be the big day.

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

Mortgage interest rates forecast for next week

Unfortunately, I reckon mortgage rates will probably remain where they are or maybe inch higher next week. But please be aware that these weekly predictions are less reliable than either daily ones or longer-term ones.

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.