Today’s mortgage and refinance rates
Average mortgage rates soared yesterday. And this week has been the worst one for mortgage rates since 1998, according to Mortgage News Daily (MND).
Often after such mayhem, markets pause and mortgage rates fall, though rarely by enough to make much difference to struggling borrowers. We may see that next week. But I’ve been presenting that as a possibility for weeks and no worthwhile falls have turned up. So, I have to continue to say mortgage rates might rise next week while hoping we might see some limited relief.
Current mortgage and refinance rates
|Conventional 30 year fixed|
|Conventional 30 year fixed||4.964%||4.99%||+0.23%|
|Conventional 15 year fixed|
|Conventional 15 year fixed||4.001%||4.036%||+0.12%|
|Conventional 20 year fixed|
|Conventional 20 year fixed||4.928%||4.965%||+0.22%|
|Conventional 10 year fixed|
|Conventional 10 year fixed||4.08%||4.153%||+0.19%|
|30 year fixed FHA|
|30 year fixed FHA||4.855%||5.666%||+0.07%|
|15 year fixed FHA|
|15 year fixed FHA||4.418%||4.98%||+0.15%|
|30 year fixed VA|
|30 year fixed VA||4.71%||4.92%||-0.06%|
|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'd lock my rate on the first morning when mortgage rates look likely to rise. Recently, that’s been most mornings.
We’re overdue a brief period of moderate falls. But I’d be surprised if those were enough to make up for a small fraction of this week’s rises. And I certainly wouldn’t delay locking to wait for them, not least because they might not turn up for weeks — and even then could deliver only limited benefits. Overall, I expect rates to continue rising, though more slowly than of late.
Still, 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 personal tolerance for risk help guide you.
What’s moving current mortgage rates
It’s been a memorable week for mortgage rates but in the worst possible way. We haven’t seen such sharp rises over seven days in nearly 40 years. And those of us who watch these rates for a living are left open-mouthed. I can’t think of anybody who was expecting this.
Federal Reserve on rates
The changes we’ve been seeing in mortgage rates over the last 10 days are almost entirely down to the Federal Reserve’s plans to tackle inflation.
The Mar. 16 meeting of the Federal Reserve’s Federal Open Market Committee (FOMC, its monetary policy body) showed the central bank was prepared to go to almost any lengths to rein in inflation. But, this week, it’s been Fed officials underscoring that message that have triggered the sharpest rises.
Let’s use MND’s rate archive to match events to rate rises.
According to The Wall Street Journal (paywall): “On Monday, Fed chairman Jerome Powell said half-percentage-point increases, rather than the more customary quarter-percentage-point changes, were possible if needed. Other officials like Loretta Mester of the Cleveland Fed, who holds an FOMC vote this year, said half percentage point increases were on the table ...”
That day, the average rate for a 30-year, fixed-rate mortgage jumped 20 basis points (a basis point is one-hundredth of 1%) to 4.66% from 4.46% the previous day.
Then, yesterday, the Journal reported, “Federal Reserve Bank of New York leader John Williams said Friday that he is open to the central bank doing a half-percentage-point interest rate increase if the economy’s outlook calls for it ...”
That same rate soared by 24 basis points yesterday to 4.95% from 4.71%. According to The Mortgage Reports’ reading, the former was 4.964% this morning.
So, last Friday, that mortgage rate stood at 4.46%. Yesterday evening, it was up to 4.95%. That’s just horrible.
Of course, there’s no formal relationship between the Fed hiking its own rate (the federal funds rate) and mortgage rate changes. However, there’s clearly a knock-on effect. But there may be something else in play ...
Federal Reserve on mortgage bonds
Some of that dramatic rise in mortgage rates may be down to concern over the future of mortgage bonds. If the Fed’s willing to move so aggressively over the federal funds rate, might it be just as pugnacious over its stockpile of mortgage bonds, known as mortgage-backed securities (MBSs)? As of Wednesday, its holdings of those were worth just shy of $2.74 trillion. Yes, trillion.
For months, we’ve known that the Fed plans to begin to sell those sometime this year, perhaps in the summer. And that’s something that should push up mortgage rates further. How much further depends on how quickly it sells how many of them.
Of course, it won’t deliberately flood the market with them. But, if it sells them as aggressively as it plans to hike its rates, the upward pressure on mortgage rates could be considerable.
The Fed’s promised to unveil its plans for MBSs on May 4, immediately after the next meeting of the FOMC. Until then, investors may be nervous about buying MBSs ahead of that announcement. Because the extra supply should push MBS prices down, meaning they’ll be able to buy the same investment in a few weeks for less money.
To be clear, it’s a mathematical certainty that yields on all bonds rise when the price falls. And yields on MBSs largely determine mortgage rates.
A glimmer of hope
Last Saturday, I wrote: " ... many think the worst rises are in the rearview mirror. Bond markets do their best to trade ahead of events, including Fed actions. And the market that largely determines mortgage rates, in which mortgage-backed securities (MBSs) are traded, is no exception.”
Well, that turned out badly. Far from being in the rearview mirror, the worst rises were just days ahead of us. Bond markets’ crystal balls were even cloudier than usual.
But the principle holds good. The more the MBS market overestimates the Fed’s actions, the more room there is for some mortgage rate falls when a gentler reality emerges. Unless, of course, the Fed decides to be even more aggressive than markets fear.
Unfortunately for many readers, any such adjustment will come too late. If you’re closing before May 4, the FOMC announcement will do you no good. Of course, markets may have second thoughts and bring about periods of lower mortgage rates between now and then. But I’d be surprised if they went much lower or stayed that way for long.
Economic reports next week
To be honest, even important economic reports have barely affected mortgage rates recently. The MBS market is too obsessed by the Fed to worry about other stuff.
But, if any report can move mortgage rates, it’s likely to be March’s official employment situation report, due out next Friday. Strong jobs figures give the Fed more leeway to act aggressively against inflation. And ADP’s unofficial, private-sector employment report that Wednesday is sometimes seen as a bellwether for the official one.
Next week, the other potentially important report is Thursday’s personal consumption expenditures (PCE) price index. This is the Fed’s preferred measure of inflation. And an unexpectedly high reading might encourage it to be even tougher over its rate hikes and sales of MBSs.
The potentially most important reports, below, are set in bold. The others are unlikely to move markets much unless they contain shockingly good or bad data.
- Tuesday — January home price indexes from Case-Shiller and the Federal Housing Finance Agency. Plus February’s official Job Openings and Labor Turnover Survey (JOLTS) and the March consumer confidence index
- Wednesday — March ADP employment report. And revised gross domestic product figures for the fourth quarter of 2021
- Thursday — February PCE price index. Plus weekly new claims for unemployment insurance to March 26
- Friday — March employment situation report, including nonfarm payrolls, unemployment rate and average hourly earnings. Plus the March manufacturing index from the Institute for Supply Management (ISM) and February construction spending
Usually, I’d warn you to hold onto your hat with such a collection of important reports. But, amid the current mayhem, there’s no guarantee markets will pay much attention to any of them.
Mortgage interest rates forecast for next week
I can only repeat what I said last week: “I shouldn’t be surprised if mortgage rates were to move higher next week. But we’re due a brief period of modest falls soon. And that could come next week. If it does, my prediction could be wrong.”
Mortgage and refinance rates usually move in tandem. And the scrapping of the adverse market refinance fee last year has largely eliminated a gap that had grown between the two.
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, 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 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.