Mortgage and refinance rates today, Sep. 17, and rate forecast for next week

Today’s mortgage and refinance rates

Average mortgage rates just inched higher yesterday. But, over the week, they climbed by an appreciable amount. And they currently stand at 14-year highs.

It remains impossible to forecast what will happen to mortgage rates during the coming week. That will probably be largely decided by the size of the Federal Reserve’s rate hike next Wednesday. And nobody knows how big that will be, probably including the Fed.

Current mortgage and refinance rates

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.

Some experts believe mortgage rates will move lower between now and the end of 2021. But I’m not one of them.

So, 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 own tolerance for risk help guide you.

What’s moving current mortgage rates

Last week brought a double whammy of bad news for mortgage rates. First, inflation turned out to be more persistent than markets had hoped. And, secondly, better-than-expected retail sales figures for August suggested the economy is holding up pretty well.

Both those made it more likely that the Federal Reserve will hike its rates significantly next Wednesday. Chances are, we’ll see a 75-basis-point (0.75%) rise that day. That’s a very big rise by historical standards. Yet this will be the third consecutive hike of that size this year.

There’s now little hope of a smaller increase of 50 basis points (0.5%). The CME FedWatch tool doesn’t even register that as a possibility. And, overnight, it put the probability of a 75-basis-point one at 82%.

The other 18%? That’s the likelihood of an enormous 100 basis point (1%) rise. That wouldn’t be the biggest hike ever: it rose 200 basis points (2%) in one day in December 1980. But it would be incredibly high by more recent standards.

Clearly, a 75-basis-point hike is much more likely. But don’t discount the possibility of a bigger one. Remember the 2016 presidential election. In a post-mortem of the result, Pew noted: “Relying largely on opinion polls, election forecasters put Clinton’s chance of winning at anywhere from 70% to as high as 99%.” Hmm. Big probabilities don’t always turn into reality.

Fed and mortgage rates

The Fed doesn’t actually set mortgage rates. Those are largely determined by the bond market in which mortgage-backed securities (MBSs) are traded. When there’s strong demand for these mortgage bonds, their prices rise and their yields (and mortgage rates) fall. The opposite happens when demand is weak.

By the way, that inverse relationship between prices and yields may be counterintuitive, but it’s a mathematical inevitability for all bonds.

It’s no revelation that demand for MBSs has been weak this week. That’s why mortgage rates have risen. And it’s likely at least in part a result of markets anticipating what the Fed will do next Wednesday.

The Fed doesn’t set mortgage rates. But it sure influences them.

So, markets have been busy pricing in a 75-basis-point hike this week. And, if that’s what’s delivered on Wednesday, mortgage rates might move only moderately on the news. But if that 100-basis-point one is announced, expect those rates to rise sharply.

Dot plot

Also on Wednesday, the Fed will release its “dot plot.” That reveals where members of its monetary policy committee (the Federal Open Market Committee or FOMC) expect its principal interest rate, the federal funds rate, to move in the future.

The dot plot is more than capable of moving mortgage rates appreciably all on its own. So don’t relax if the rate hike arrives as expected. See, too, what the media are saying about the dot plot.

Unfortunately, the Fed publishes its announcements after each FOMC meeting at 2 p.m. (ET) and then hosts a news conference 30 minutes later. But that’s hours after our daily rates reports are published. So search the web for Fed news stories on Wednesday afternoon.

Economic reports next week

Most of the economic reports next week are about real estate. And, ironically, those rarely affect mortgage rates. There are a few others that are sometimes capable of moving those rates modestly. But they’d have to contain some big surprises to do so.

The big event next week is the Fed’s rate announcement on Wednesday. That has the potential to really stir things up.

In the following list, key reports are in bold. Others next week are unlikely to move markets or mortgage rates much unless they contain shockingly good or bad data.

• Monday — September home builders’ index from the National Association of Home Builders
• Tuesday — August building permits and housing starts
• Wednesday — Fed rate announcement and news conference. Plus August existing home sales
• Thursday — August leading economic indicators. And weekly new claims for unemployment insurance to Sep. 17.
• Friday — September purchasing managers' indexes for the manufacturing and services sectors from S&P. These are “flashes,” meaning initial readings that may be revised later.

Watch out for Wednesday!

Mortgage interest rates forecast for next week

Amid such volatility and unpredictability, seven days is too short a time frame to make predictions about mortgage rate movements. Sorry, but I can’t even make a guess before Wednesday.

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.

Your part

But you play a big part in determining your own mortgage rate in five ways. And you can affect it significantly by:

1. Shopping around for your best mortgage rate — They vary widely from lender to lender
2. Boosting your credit score — Even a small bump can make a big difference to your rate and payments
3. Saving the biggest down payment you can — Lenders like you to have real skin in this game
4. Keeping your other borrowing modest — The lower your other monthly commitments, the bigger the mortgage you can afford
5. 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:

Down payment assistance programs in every state for 2021

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.