Today’s mortgage and refinance rates
Average mortgage rates fell a little or held steady yesterday (Friday). Unfortunately, it was the only glimmer of light in a gloomy week that saw rises – including a sharp one – on every other day.
Right now, there seems to be no end in sight to these rate increases. Of course, we’re almost bound to see an occasional fall, because that’s how markets work. But sustained downward movement appears unlikely, and I’m expecting that mortgage rates will keep rising next week. Read on for more details.Find and lock a low rate (Dec 8th, 2021)
|Conventional 30 year fixed|
|Conventional 30 year fixed||3.062%||3.065%||-0.13%|
|Conventional 15 year fixed|
|Conventional 15 year fixed||2.587%||2.596%||-0.11%|
|Conventional 20 year fixed|
|Conventional 20 year fixed||2.875%||2.882%||-0.13%|
|Conventional 10 year fixed|
|Conventional 10 year fixed||2.474%||2.493%||-0.13%|
|30 year fixed FHA|
|30 year fixed FHA||2.87%||3.549%||-0.1%|
|15 year fixed FHA|
|15 year fixed FHA||2.539%||3.121%||-0.16%|
|5 year ARM FHA|
|5 year ARM FHA||2.5%||3.213%||-0.03%|
|30 year fixed VA|
|30 year fixed VA||2.383%||2.555%||-0.36%|
|15 year fixed VA|
|15 year fixed VA||2.25%||2.571%||Unchanged|
|5 year ARM VA|
|5 year ARM VA||2.5%||2.392%||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?
If I were still floating, I’d lock my rate right away. Of course, there’s always a possibility of rates falling back. But that currently looks a slim one. And the chances of continuing rises seem much stronger. Read on to discover why.
So my 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 forces that are driving rates higher are the same ones we reported last week. The vaccination program and dwindling COVID–19 infection rates are creating optimism that an economic recovery will be upon us sooner than many expected. Indeed, we’re already seeing some better economic data. And a better economy goes hand–in–hand with higher rates.
But what we last week listed as a secondary factor may have now turned into the primary one. And that’s the fear of future inflation.
Unfortunately, such fears also tend to push mortgage rates higher.
Fear of inflation
And you can see why. Imagine you’re an investor who buys a mortgage bond (a mortgage–backed security or MBS) with a fixed rate of 3% for 30 years. That means your yield (income) is fixed, too.
And now imagine how sick you’d feel if next year (or in 10 years’ time) serious inflation took hold, and you were suddenly seeing inflation and interest rates soaring up to 10% or even higher – while you were still getting 3%.
This isn’t impossible fiction. Between 1978 and 1990, the average rate for a 30–year, fixed–rate mortgage never dipped below 10%, measured annually. And, in October 1982, that rate peaked at 18.45%, according to Freddie Mac’s archives.
It’s not hard to imagine how petrified investors are of having their money tied up in fixed–rate securities if there’s any likelihood of future inflation.
Still a slim possibility of falls
Of course, nothing’s certain in markets. And some disastrous news could come out of nowhere and kill both optimism and its accompanying fear of inflation.
Indeed, earlier this week, The New York Times reported on a new variant of SARS–CoV–2 (the virus that causes COVID–19) that’s currently circulating in New York City. And some scientists worry that it might prove more resistant to current vaccines than existing strains are.
That research is yet to be peer–reviewed. And it may turn out to be nothing. But it’s an example of the sort of news that could turn markets and mortgage rates around. The trouble is, the chances of such an event arising before your closing date don’t seem high.
Economic reports next week
Next Friday brings the official, monthly, employment situation report. And that’s arguably the most important economic data of all at the moment. So markets may be moved by those figures
They’re less likely to be affected by the other reports this week. However, any data can have an impact if it varies significantly from expectations.
Here are next week’s main economic reports:
- Monday – January construction spending. Also February auto sales. Plus the February manufacturing index from the Institute for Supply Management (ISM)
- Wednesday – February ISM services index
- Thursday – Weekly new claims for unemployment insurance.
- Friday – February employment situation report, including nonfarm payrolls and the unemployment rate.
Watch out, too, for top Federal Reserve officers’ speaking engagements. The Fed’s walking a fine line at the moment between keeping the recovery on the road and not stoking inflation fears. So investors are paying close attention to their remarks.
Mortgage interest rates forecast for next week
Unfortunately, I can only predict rising rates this week. The pace of increases may slow and we might even see some small and occasional falls. But, overall, it’s hard to imagine the recent trend reversing.
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 constant as they change.
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.