Mortgage rates today, Aug. 5, and rate forecast for next week

Today’s mortgage rates

Finally, some good news! Average mortgage rates plunged yesterday. And they’re very slightly lower than they were this time last week.

I’m going to guess that mortgage rates might edge higher next week. Read on for my reasons for thinking that.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

Might yesterday’s jobs report represent a turning point, after which we can expect a new trend of falling mortgage rates? It’s possible. But I doubt it.

We’d need to see a wide array of data consistently pointing to a weakening economy for a new trend to emerge. And I see few grounds for expecting that.

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

Yesterday’s big drop in mortgage rates was almost entirely down to that morning’s jobs report. That more or less wiped out the daily rises we’d seen in the days prior to that.

I said at the top of the page that I’d give my reasons for doubting we’ll see consistently falling mortgage rates for a while. So, what are the three that I’ve identified?

1. Markets often bounce after extreme movements

Investors can get carried away by FOMO (fear of missing out) on an exciting trading day, which yesterday was. They often chase that day’s movement, snowballing it as they do.

When they have time to reflect, overnight or over a weekend, they sometimes realize they got carried away. And then they correct their trading positions when markets next open.

This doesn’t always or even usually happen. But I think it might next week because ...

2. Yesterday’s jobs report wasn’t very good

It just wasn’t. Here are the numbers I published yesterday. The actual figures for July are in bold, and the others are, first, MarketWatch’s reported forecasts and, second, June’s actuals:

• Nonfarm payrolls (new jobs created in July) — 187,000, compared with MarketWatch’s 200,000 forecast and 209,000 in June
• Unemployment rate — 3.5%, down from 3.6% in both the forecast and June
• Hourly wages — Up 0.4%, compared with the 0.3% forecast and 0.4% in June

The unemployment rate and hourly wages would normally push mortgage rates up. So, only the nonfarm payrolls were cause for celebration. And they’re only a bit (6.5%) below the forecast.

As importantly, this is just a single, monthly report. Economists would rarely speculate about the implications of a lone set of data because they know it may well be an outlier.

The Wall Street Journal (paywall) yesterday revealed investors’ thinking: “Employers slowed their hiring this summer, adding to signs the economy is gradually cooling and easing pressure for the Federal Reserve to raise interest rates at its next meeting.”

Well, the Fed might look at it that way. But I reckon the central bank’s decision-makers are likely to need a lot more data pointing in a similar direction before deciding whether to pause or hike general interest rates when they next meet.

And it bothers me that, judging by the size of Friday’s market movements, investors seem to think yesterday’s figures clinched a pause.

3. Next week’s economic reports might be a letdown

Nobody knows what next Thursday’s consumer price index (CPI) is going to say. But it would be no surprise if the year-over-year figures looked bad.

That has little to do with what happened to prices in July 2023. It’s what happened a year earlier that counts. Comerica’s chief economist explains:

" ... consumer prices jumped in June 2022, then fell slightly in July 2023, so a steady pace of monthly increases in mid-2023 would translate into higher year-over-year inflation in July than June. July likely saw higher monthly CPI inflation as well due to rising gasoline prices in the back half of the month.”

Markets should be expecting this. But, as we saw yesterday, they often respond to data instinctively rather than analytically.

Next week

The CPI is by far the most important economic report scheduled for next week. Investors are obsessed with inflation.

That means next week’s other inflation report, which lands on Friday, might also prove influential. It’s the producer price index (PPI) for July.

PPIs point to future inflation rates. They measure price changes in offices of service providers and at factory gates and in warehouses. So, what appears in one month’s PPI might well crop up again in the CPI a month or so later.

Besides those inflation reports, there’s little else on the calendar that’s likely to move mortgage rates far. However, the Federal Reserve is fielding a couple of speakers next Tuesday. And their take on how the jobs report might affect general interest rates could be influential.

Economic reports next week

I covered next week’s inflation reports in the previous sections. Watch out for those Fed speakers, too.

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

• Monday — June consumer credit
• Tuesday — July small business optimism index from the National Federation of Independent Business. Plus the trade balance and wholesale inventories for June
• Thursday — July consumer price index. And the July Treasury budget. Plus new jobless claims for the week ending Aug. 5
• Friday — July producer price index. Plus a preliminary reading of the August consumer sentiment index

Watch out for Thursday’s CPI.

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

Mortgage interest rates forecast for next week

I always have low confidence in my weekly predictions. It’s much easier to look further ahead at long-term trends. Or to work out how markets might respond to new data or track a new mood over a single day.

Having said that, I always try to make a weekly forecast alongside caveats about its limitations. And, again, I predict that mortgage rates might rise moderately or modestly next week. Clearly, I was wrong last week. Sorry!

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 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.