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

Today’s mortgage rates

Average mortgage rates tumbled significantly yesterday. That crowned a very good week for those rates.

I’m predicting that mortgage rates might rise a little next week. If that happens (and it’s a big if), it will likely be because markets sober up after yesterday’s mayhem and decide they went too far. Such bounces are common after sharp movements, but they rarely wipe out more than a small fraction of the gains or losses made.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

Mortgage rates plummeted by 41 basis points (a basis point is one-hundredth of 1%) this week, according to Mortgage News Daily’s archive. They stand at 6.4% this morning, compared to 6.81% seven days ago.

Such a fall was far from a foregone conclusion. And there were real risks that they could have been higher this morning than a week earlier. But all the cards fell our way and here we are in a much happier situation.

So, I’ve this morning reached a point where I must revisit my personal rate lock recommendations. And they are now:

• 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

Of course, I’m not suggesting you lock on a day when mortgage rates are falling. There will likely be plenty of days and longer periods when the outlook for those rates is positive. By all means, take advantage of those.

Moreover, 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.

Why not float when you’re within 15 days of closing? Well, there’s always a chance (especially right now) of a sudden, unexpected rise. And it could take 15 days for them to come back down. Of course, if you’re comfortable with that risk, float away.

What’s moving current mortgage rates

What’s going on?

Yesterday’s jobs report was bad news for the economy. And, as is usually the case, that means it was good for mortgage rates. Very good, in fact.

Before the jobs report came out, Wall Street had been a bit nervous that it would show a strong labor market. And, had that been the case, that might have blown off course the Federal Reserve’s plans (subject to economic data) to cut general interest rates on Sep. 18.

But the opposite was the case. And now a Fed cut that day is all but locked in. Better yet, the CME FedWatch tool suggests a 22% chance of a whopping half-point (50-basis-point) fall in September rather than the normal 25-basis-point one.

Yesterday afternoon, The Wall Street Journal (paywall), reported: “The jobs report is sure to give another spark to debates about whether the Federal Reserve is behind the curve in its handling of the economy. Fed policymakers on Wednesday kept rates where they are, but strongly implied that they would cut in September.

“Some investors have started to question whether the Fed has already waited too long to trim interest rates,” the Journal continued. “And while that debate may be a moot point—a cut in September looks all but guaranteed—many investors will want the Fed to cut by a half point instead of the quarter point they were expecting. Interest-rate futures on Friday went from implying a quarter-point cut in September to a half-point cut.”

Next week

There’s very little on next week’s calendar that’s likely to affect mortgage rates. Indeed, the next seriously consequential economic report is the consumer price index. And that’s not due until Aug. 14.

However, a couple of July purchasing managers’ indexes (PMI’s) are on next Monday’s calendar. They both cover the services sector, and one is from S&P Global and the other the Institute for Supply Management (ISM).

PMIs can affect mortgage rates. But they tend to do so only in a limited and temporary way: a small movement that fades after a day or two.

And next week’s other reports almost never have any perceptible impact at all.

Summary of economic reports and events next week

See above for details about the more important economic reports next week. Any abbreviations below are also explained there.

In the following list of next week’s reports, only those in bold typically have the potential to affect mortgage rates appreciably. The others probably won’t have much impact unless they contain shockingly good or bad data.

• Monday — July PMIs for the services sector from S&P and the ISM
• Tuesday — June trade deficit
• Wednesday — June consumer credit
• Thursday — June wholesale inventories. And initial jobless claims for the week ending Aug. 3
• Friday — Nothing

With luck, we’re in for a quiet week.

Time to make a move? Let us find the right mortgage for you

Mortgage rates forecast for next week

I think we may see a small rise in mortgage rates next week. If so, I’d expect it to be a routine bounce back of the type that often occurs after sharp movements in markets. It’s even possible that Monday’s PMIs could counteract that if they show the services sector struggling.

Don’t take these weekly predictions too seriously. It’s much easier to make daily and long-term ones.

How your mortgage interest rate is determined

A bond market generally determines mortgage and refinance rates. It’s the one where trading in mortgage-backed securities takes place.

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 something called you “PITI.” That stands for:

• Principal — Pays down the amount you borrowed
• Interest — The price of borrowing
• Taxes — Specifically property taxes
• Insurance — Specifically 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 rate 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 2023

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.