Today’s mortgage and refinance rates
Average mortgage rates rose moderately yesterday for a second consecutive day. And they’re higher so far this month. But they were appreciably lower when they closed on Friday evening than they’d been seven days earlier.
Yet again, I can’t predict in which direction mortgage rates will move next week. The forces acting to push up and pull down mortgage rates are too evenly matched for me even to hazard a helpful guess.
Current mortgage and refinance rates
|Conventional 30 year fixed|
|Conventional 30 year fixed||5.451%||5.485%||-0.03%|
|Conventional 15 year fixed|
|Conventional 15 year fixed||5.012%||5.072%||-0.03%|
|Conventional 20 year fixed|
|Conventional 20 year fixed||5.493%||5.55%||-0.07%|
|Conventional 10 year fixed|
|Conventional 10 year fixed||5.11%||5.208%||+0.01%|
|30 year fixed FHA|
|30 year fixed FHA||5.467%||6.244%||+0.01%|
|15 year fixed FHA|
|15 year fixed FHA||5.283%||5.772%||-0.01%|
|30 year fixed VA|
|30 year fixed VA||5.093%||5.312%||Unchanged|
|15 year fixed VA|
|15 year fixed VA||5.289%||5.659%||-0.02%|
|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.
After only two weeks of revised rate lock recommendations (below), I’m switching them back today. For a while, I thought I could see grounds for optimism over mortgage rates. But, on the balance of possibilities, I no longer can. Read the following sections for my reasons.
Of course, those recommendations merely reflect what I’d do, were I to be deciding when to lock my own rate. And I’m exceptionally cautious. But it’s down to you — and your own tolerance for risk — to choose when to lock. If you enjoy a gamble, you might prefer to wait to see what happens next.
So, here are my new (old) personal rate lock recommendations:
- 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
Mortgage rates fell last week but are higher than they were at the start of August. The month has seen record (or near-record) daily rises and falls. And the whole scene is very messy.
Different observers of mortgage rates have used various metaphors to describe what’s going on. You might prefer a tug of war, a boxing match or an old sailing ship rounding Cape Horn during a terrible storm and being repeatedly pushed back by headwinds and blown forward by tail ones.
Behind each metaphor is an epic battle between investors’ two biggest fears: of a recession (which pulls mortgage rates lower) and inflation (which pushes them higher). For several weeks, those investors have been unsure which scares them more. And, every time one looms larger than the other, market reactions are sharp and swift.
Normally, you might expect such a tussle to resolve itself fairly quickly. But the two fears are so powerful and evenly matched that it’s dragging on and on.
However, something unexpected has been happening over the last eight days. Both inflation and a possible recession have become less scary.
It started when July’s employment numbers turned out to be wildly better than economists had forecast: twice as good. If we were heading into a recession, it was a very different one from any we’d experienced before.
True, we’d experienced two consecutive quarters of declining gross domestic product (GDP). In America, that doesn’t automatically mean a recession, though some economists use it as a rule of thumb.
But we already knew that much of any contraction was down to businesses running down their warehouse inventories. During the COVID-19 pandemic, consumers had switched much of their spending to goods from services. And retailers and others had increased their stock levels in response. As lockdowns ended and confidence grew, people returned to their old spending habits: eating out, traveling, going to the gym and so on. And businesses were left with excess stock.
So the economic contraction in the first half of 2022 was not a regular one. And, on Aug. 9, The Wall Street Journal (paywall) carried an opinion piece observing that data that normally shadow GDP were veering away from it.
Chair in free enterprise at Chapman University Mark Skousen looked at measures such as the coincident economic index, gross output and gross domestic income. They normally align with GDP. But they’re not currently doing so. And he concluded:
... a host of statistics suggest that the economy is still growing ...
Meanwhile, Americans are sensing things aren’t as bad as they feared. And yesterday’s consumer sentiment index saw confidence growing in August compared to July.
Normally, you might expect receding fears of a recession to push mortgage rates higher as investors switch their focus back to inflation. But, this week, inflation itself looked less scary.
This week was an important one for economic reports concerning inflation. Wednesday’s consumer price index (CPI) was by far the most influential. But the producer price index (PPI) and the import price index (IPI), which suggest where prices will be heading, are also significant.
And all three of these measures came in much better than economists had expected. The CPI showed prices didn’t move in July. And, year over year, they rose by 8.5%, down from 9.1% in June. Meanwhile, the PPI and IPI both suggested falling retail prices in the future, all things being equal.
Of course, nobody should take one month’s figures as indicative of a long-term trend. And we’ll need several more months of similar or better figures before concluding that inflation has been tamed. But, finally, the omens are good.
The Federal Reserve
One organization that isn’t taking anything for granted is the Fed. Markets initially seemed to think the central bank would pause or reduce its program of interest rate hikes in response to improving economic data.
Several top Fed officials soon emerged from the woodwork to disabuse them. Still, the Sept. 21 rate increase might be 50 basis points (0.5%) rather than the feared 75-basis-point (0.75%) one.
Of course, mortgage rates for new loans aren’t directly affected by Fed rate hikes. They’re determined by yields in a bond market in which mortgage-backed securities are traded. However, there’s no doubt the market is strongly influenced by what the central bank does.
To be clear, nothing can touch existing, fixed-rate mortgages. And they make up the vast majority of all home loans. But rates on existing, adjustable-rate mortgages (ARMs) are directly affected by Fed rate changes, once they’re out of their initial, fixed-rate phase.
What this means for mortgage rates
There’s still plenty of scope for inflation or the possibility of a recession (or both) to get way scarier again. Alternatively, both prospects may continue to improve.
If a recession becomes more likely again, that’s good news for mortgage rates but pretty much nothing else. If inflation resumes its grim climb, that’s bad news for mortgage rates and almost everything else.
Meanwhile, the Fed looks set to continue hiking rates at least to the end of the year (at a likely minimum of 50 basis points at each of its remaining three monetary policy meetings) and possibly well into 2023.
Suppose we continue to have good news concerning both the economy and inflation. In that best case, the Fed alone might keep mortgage rates where they are or a little higher.
And the only scenario in which I see those rates falling far — at least for long — is an unlikely one: tumbling inflation and an actual recession or a greatly heightened possibility of one.
Of course, there will inevitably be periods of falling mortgage rates whatever happens. But I doubt they’ll be sustained ones except in that one scenario. And, absent that, I reckon mortgage rates are more likely to modestly rise than fall over the coming months.
Sorry! I wish I could be more optimistic.
Economic reports next week
We’ll get retail sales figures for July on Wednesday. They’re important because they reflect consumer confidence and that affects the possibility of a recession. However, we know, courtesy of yesterday’s consumer sentiment index, that confidence has improved over the last month.
Wednesday also brings publication of the minutes of the last meeting of the Federal Open Market Committee (FOMC). This is the Federal Reserve’s monetary policy committee. And markets will pore over every word to try to divine more about the Fed’s thinking and plans. Mortgage rates might move if anything of significance emerges.
There are several other less influential reports next week but most are mainly of interest to those who work or invest in construction or real estate.
Critical reports in the following calendar are shown in bold. Other reports next week are unlikely to move markets or mortgage rates much unless they contain shockingly good or bad data.
- Monday — National Association of Home Builders index for August
- Tuesday — July industrial production and capacity utilization. Plus July building permits and housing starts
- Wednesday — July retail sales. Plus FOMC minutes
- Thursday — July leading economic indicators and existing home sales. Plus weekly new claims for unemployment insurance to Aug. 13
Wednesday’s likely to be the only big day for mortgage rates.
Mortgage interest rates forecast for next week
I shouldn’t blame recent readers for assuming I never make weekly forecasts. But actually, in normal times, I only rarely chicken out. Unfortunately, these aren’t normal times. And I lack the information even to make a guess.
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.