Mortgage and refinance rates today, Dec. 3, and rate forecast for next week

Today’s mortgage and refinance rates

Average mortgage rates nudged higher yesterday. But the last week has been an exceptionally good one for those rates.

Once again, it’s impossible to predict what will happen to mortgage rates over the next seven days. Nothing on the calendar of economic reports is likely to move them far. But two crucial economic events are looming in 10 days or so. And that could make investors jittery — and markets volatile — as they lay their bets on what those events will bring.

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.

To me, the huge fall in mortgage rates on Nov. 10 and the significant one on Dec. 1 were irrational. They were huge bets on future Federal Reserve moves that the Fed itself says it won’t deliver. But, as long as investors remain happy with their wagers, those rates should stay low. Just be aware that they could rise sharply if those investors suddenly get nervous.

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

The dramatic fall in mortgage rates on Nov. 10 was triggered by a single good inflation report (the consumer price index, CPI). That made no sense to me. Investing 101 starts with the observation that no single monthly report is a good basis for investment decisions.

A large part of the reason for that fall was that investors thought it would change the Fed’s timetable for rate hikes and bring an earlier “pivot,” meaning the time when the Fed would change direction and start cutting interest rates.

The Fed itself denied that was true. Yes, it would likely hike rates by only 50 basis points (0.5%) at its next meeting on Dec. 14, which would interrupt a succession of four 0.75% rises. But it signaled that would likely be the case way before Nov. 10.

The Dec. 1 fall was less steep than the earlier plummet but still very worthwhile. And it had more cause. Because it was a result of a second inflation report (the personal consumption expenditures (PCE) price index) confirming that the CPI wasn’t an outlier.

Irrational?

But, still, both reports covered the same month. So it remains possible that October itself was an outlier.

Yesterday, I quoted CNN Business writer Nicole Goodkind. It’s worth repeating: “My mother told me to hope for the best but expect the worst. When it comes to a Fed pivot, that’s a lesson investors still need to learn.”

My concern since Nov. 10 has been that investors will start listening to the Fed and the countless business commentators who’ve warned that they’ve been irrational. Were that to have happened, mortgage rates would likely have bounced back.

That risk hasn’t totally gone away. But I guess it’s less likely than it was a week ago. Investors may well figure that they should stick to their bets at least until Dec. 13, when the next CPI report is due out, and Dec. 14, when the Fed’s monetary policy body, the Federal Open Market Committee, meets.

I’m not alone

I suppose I’m a bit embarrassed that my gloomy predictions for mortgage rates since Nov. 10 have so far proved wrong. Am I being too defensive if I point out that many others believe as I do?

As I reported earlier this week, on Nov. 21, Realtor.com ran an article under the headline Are Lower Mortgage Rates a Holiday Gift for Homebuyers—or a Temporary Reprieve? And it confirmed that many have similar concerns to mine:

Many real estate experts believe the lower rates are a temporary reprieve, not a sign that rates will go back to the 2% and 3% ranges seen last year. In fact, many anticipate rates will return to around 7% this year.

Economic reports next week

Next week has fewer important economic reports than this one did. And, subject to what I wrote above, the next seven days may be a quieter one for mortgage rates.

The ones with the most potential impact are shown below in bold. The others could still move mortgage rates. But probably only if they reveal shockingly good or bad data.

• Monday — November indexes for the services sector from S&P and the Institute for Supply Management (ISM). Plus October factory orders
• Wednesday — Revised figures for productivity and unit labor costs in the third quarter
• Thursday — Initial jobless claims for the week ending Dec. 3
• Friday — November producer price index. Plus the December consumer sentiment index

It could be a tranquil week.

Mortgage interest rates forecast for next week

There’s no way for me to predict what will happen to mortgage rates next week. Markets appear to me to be acting irrationally, which makes anticipating their movements impossible.

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.