Today’s mortgage and refinance rates
Average mortgage rates fell appreciably again, both yesterday and over the week and month. And it’s reached the point where I have to change my rate lock recommendations (below). For the first time in a very long time, I’m encouraging many mortgage applicants to float their rates.
Even so, I’m not yet ready to provide a forecast of where mortgage rates will go next week. The recent direction of movement suggests they might fall again. But these rates often rebound after the sorts of significant falls we’ve seen recently.
Current mortgage and refinance rates
|Conventional 30 year fixed|
|Conventional 30 year fixed||5.364%||5.398%||-0.11%|
|Conventional 15 year fixed|
|Conventional 15 year fixed||4.574%||4.626%||-0.15%|
|Conventional 20 year fixed|
|Conventional 20 year fixed||5.011%||5.066%||-0.37%|
|Conventional 10 year fixed|
|Conventional 10 year fixed||4.715%||4.814%||-0.05%|
|30 year fixed FHA|
|30 year fixed FHA||5.461%||6.306%||-0.21%|
|15 year fixed FHA|
|15 year fixed FHA||4.847%||5.296%||-0.14%|
|30 year fixed VA|
|30 year fixed VA||4.803%||5.019%||-0.2%|
|15 year fixed VA|
|15 year fixed VA||4.862%||5.229%||-0.12%|
|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?
Don't lock on a day when mortgage rates look set to fall. My recommendations (below) are intended to give longer-term suggestions about the overall direction of those rates. So, they don’t change daily to reflect fleeting sentiments in volatile markets.
Today we have new rate lock recommendations. Why have I been so reluctant to change them before? For two reasons. First, the level of uncertainty surrounding rates remains high; anything could yet happen. And, secondly, most readers prefer to miss out on possible savings than experience the actual losses that locking too late can bring. Most of us have “loss aversion bias.”
OK, but why haven’t I changed them all to “float?” Because of all that uncertainty in key markets. Mortgage rates often bounce back after dramatic falls. And, if you have only a week or two before closing, your chances of having time for those rates to fall again are smaller than if you have a month or two to go.
Here are my revised personal rate lock recommendations:
- 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 personal tolerance for risk help guide you.
What’s moving current mortgage rates
Markets are confusing at the moment — and quite possibly confused. On the one hand, stock markets are partying, with The New York Times (paywall) reporting yesterday: “July turned out to be the best month for Wall Street’s stock investors since November 2020.”
Meanwhile, bond markets spent July acting as if the US were already in a recession. True, they had grounds for those concerns. And Thursday’s gross domestic product (GDP) figures showed the nation had experienced two consecutive quarters of contraction.
But there’s a good reason for that contraction. During the pandemic, people switched their spending from services (dining out, traveling, going to the gym or bar ...) to goods. Now lockdowns are over (we hope), consumers are switching back to a more normal balance between goods and services.
But companies built their inventories of goods to meet COVID-19 demand, filling their warehouses. They’re now normalizing their stocks. As a Wall Street Journal (paywall) headline said on Thursday, “Inventory Swing Is a Key Culprit Behind U.S. Recession Talk.”
As importantly, the usual signs of recession — rising unemployment, and falling incomes and retail sales — are largely absent still. Yes, there are worrying signs, domestically and globally, about the future. But we still seem a long way off actually entering one.
Friday’s Personal Consumption Expenditures (PCE) price index showed inflation continuing to surge. Here’s Comerica Bank’s take on the index:
The PCE Price Index, the Fed’s preferred inflation gauge, rose 1.0% last month, matching our expectations and a notch above the 0.9% market consensus. Headline PCE inflation jumped to 6.8% on an annual basis from 6.3% in May, and core inflation also rose in those terms, to 4.8% from 4.7% in May.
What I found strange is that markets barely responded to that news. True, mortgage rates began yesterday morning rising, but they soon turned tail and fell back.
Normally, bond investors are highly sensitive to rising inflation rates. After all, it eats into the value of their investments. If you’re earning a 3% yield on your mortgage bond and inflation is running at 6.8%, you’re making a hefty, real-terms (after inflation) loss.
What this means for mortgage rates
I’ve been saying for some time that markets have been switching their focus between fears of inflation and recession. When they’re more scared of inflation, mortgage rates tend to rise. When they’re more worried about a possible recession, those rates tend to fall.
I’m surprised that yesterday’s PCE inflation report didn’t return markets’ focus to inflation. Might there be a delayed reaction that plays out next week in higher mortgage rates? Or is their recession obsession so strong they’ll continue to shrug off what’s usually their greatest fear?
What happens to mortgage rates next week and beyond will depend on the answers to those questions.
Economic reports next week
By far the most important economic report next week is the official, monthly employment situation report, due out on Friday morning. Most economists are expecting job growth to continue, though at a slower pace. But, if that pace is slower than expected, that could boost markets’ recession obsession, and probably bring mortgage rates lower. Of course, the opposite could apply.
Critical reports in the following calendar are shown in bold. Other reports next week are unlikely to move markets much unless they contain shockingly good or bad data.
- Monday — Institute for Supply Management (ISM) manufacturing index for July
- Tuesday — June job openings and quits. Plus motor vehicle sales (released by individual manufacturers throughout the day)
- Wednesday — July ISM services index. Plus June factory orders
- Thursday — June trade deficit. Plus weekly new claims for unemployment insurance to Jul. 30
- Friday — July employment situation report, including nonfarm payrolls, unemployment rate and average hourly earnings
Watch out for Friday!
Mortgage interest rates forecast for next week
As you’ll have gathered, I’m struggling to get my head around what markets are up to. So, I’m again unable to forecast where mortgage rates will head next week.
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.
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.
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.