Today’s mortgage and refinance rates
Average mortgage rates edged lower again yesterday. That was almost certainly a result of heightened worries about the new Omicron variant of COVID-19.
I’m guessing that mortgage rates may fall next week, too. The news concerning Omicron seems to be getting worse each day. And it probably won’t be long before its economic impacts become apparent.
Current mortgage and refinance rates
|Conventional 30 year fixed|
|Conventional 30 year fixed||3.274%||3.295%||Unchanged|
|Conventional 15 year fixed|
|Conventional 15 year fixed||2.485%||2.517%||Unchanged|
|Conventional 20 year fixed|
|Conventional 20 year fixed||3.154%||3.193%||Unchanged|
|Conventional 10 year fixed|
|Conventional 10 year fixed||2.599%||2.663%||+0.02%|
|30 year fixed FHA|
|30 year fixed FHA||3.309%||4.074%||+0.02%|
|15 year fixed FHA|
|15 year fixed FHA||2.581%||3.227%||-0.02%|
|5/1 ARM FHA|
|5/1 ARM FHA||2.192%||3.104%||-0.01%|
|30 year fixed VA|
|30 year fixed VA||3.185%||3.382%||+0.02%|
|15 year fixed VA|
|15 year fixed VA||2.822%||3.169%||-0.06%|
|5/1 ARM VA|
|5/1 ARM VA||2.5%||2.513%||+0.01%|
|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?
I think I’d wait to lock my mortgage rate if I were you. That’s because the direction of travel for those rates is likely to be largely determined by emerging science about the Omicron variant of COVID-19. And we probably won’t get sufficient information to make a judgment about the mutated virus’s medical and economic threats for at least a week.
In the meantime, early signs are bad. And that’s likely to keep mortgage rates low, at least until we get more reliable data.
So, I’m once again changing my personal rate lock recommendations. And they’re now:
- FLOAT if closing in 7 days
- FLOAT 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 be guided by your gut and your personal tolerance for risk.
What’s moving current mortgage rates
This time last week it looked likely that the Federal Reserve might move mortgage rates this week. But it did its worst — theoretically sending those rates higher — and they have actually fallen over the last seven days. How come?
Well, it’s all about the new Omicron variant of COVID-19. That and its possible economic effects have finally caught investors’ attention. And markets are eyeing them warily.
The New York Times is reporting that new cases of COVID-19 have jumped 20% over the last 14 days while new deaths have leapt 15%. The situation is even direr in places where Omicron is known to have a foothold. The Times (paywall) reported yesterday:
State officials in New York reported more than 20,000 coronavirus cases on Friday, which they said was more than on any other day of the pandemic. In Connecticut and Maine, reports of new infections have grown by around 150 percent in the last two weeks. In Ohio and Indiana, hospitalization rates are approaching those seen during last winter’s devastating wave.— NYT, "Doctors and Nurses Are ‘Living in a Constant Crisis’ as Covid Fills Hospitals" (paywall), Dec. 17, 2021
Worse before better?
Sadly, it’s looking as if things are likely to get worse rather than better. We can see that by glancing across the Atlantic where the UK is weeks ahead of our Omicron situation. Earlier today, The Economist summed up that country’s predicament:
EXPONENTIAL GROWTH is a dizzying thing. In the week to December 8th Britain saw 536 new cases of covid-19 ascribed to the Omicron variant, less than 0.5% of the number caused by the dominant Delta variant. But the week before there had been only 32 cases of Omicron — and by December 14th the case number was over 10,000. Omicron looks set to become the country’s dominant strain in terms of cases before advent calendars run out of windows.— Economist, "The Omicron variant advances at an incredible rate," (paywall) Dec. 18, 2021
Yesterday, Dr. Neil Ferguson, a public health researcher and professor of mathematical biology at Imperial College London, forecast that there could be 5,000 Omicron deaths a day this winter in the UK — unless the government imposes extreme lockdown measures.
Remember, the UK has a population that’s roughly one-fifth the size of America’s. So that would translate into 25,000 deaths a day here, were the situation to be replicated.
There may still be some truth in early indications that Omicron creates a smaller risk of death and serious health outcomes for each infected individual than Delta and other earlier variants. But its sky-high transmission rate means the sheer number of infected people will likely lead to more deaths and hospitalizations across populations. A small proportion of an enormous number is still a large number.
Meanwhile, a separate report from a group of academic institutions, including the University of Washington and Imperial College London, “found that vaccines are substantially less effective against Omicron than Delta and saw no evidence that Omicron is intrinsically milder than Delta,” in The Guardian’s words.
All this is scary. But it’s based on very early readings of limited data. And things may yet turn out to be less terrible than currently looks likely. Some think we may have more reliable information in a week or two.
It seems crudely insensitive to turn now from a potential human tragedy to Omicron’s likely effect on mortgage rates. But that’s what they pay me for. (Focusing on mortgage rates, not being crudely insensitive.)
If Omicron hits the US economy as hard as early indicators suggest might happen, mortgage rates are likely to fall, perhaps to new all-time lows. Already, in the UK, it’s affecting business, according to the latest “flash” (a preliminary reading, subject to revision) of the IHS Markit/CIPS UK Composite Purchasing Managers’ Index (PMI). Reuters reported on Thursday:
The spread of the Omicron variant of coronavirus has hammered British hospitality and travel companies this month, sending private sector growth to a 10-month low, a survey showed— Reuters, "Omicron hits UK businesses hard in December — PMI," Dec. 16, 2021
If we see serious economic effects arising from Omicron in America that could throttle our recovery and throw economic growth into reverse. And that would almost inevitably lead to lower mortgage rates.
That threat’s not certain yet. But it’s a sufficiently strong possibility (arguably, probability) for me to change my rate lock recommendations today.
Economic reports next week
If I’m right about worsening news concerning the Omicron variant, markets may well shrug off economic reports next week. However, there are ones that would normally be seen as highly important on Thursday. And they may cut through.
The week’s key reports, below, are in bold.
But none of the other economic reports listed below is likely to cause much movement in markets unless it includes shockingly good or bad data:
- Wednesday — Final revision of the third quarter’s gross domestic product (GDP). Plus December’s consumer confidence index.
- Thursday — November data for real and nominal personal income and consumer spending; core inflation; and durable and capital goods orders. Also December’s consumer sentiment index. Plus weekly new claims for unemployment insurance to Dec. 18
If any, Thursday’s the big day.
Mortgage interest rates forecast for next week
Mortgage rates might fall next week. But that depends on how Omicron news evolves.
Mortgage and refinance rates usually move in tandem. And a gap that had grown between the two has been largely eliminated by the scrapping of the adverse market refinance fee.
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, 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) 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 result is a good snapshot of daily rates and how they change over time.