Mortgage rates today, Aug. 12, and rate forecast for next week

Today’s mortgage rates

Average mortgage rates nudged higher yesterday. And they’re now appreciably higher than they were this time last week. Indeed, they’re now almost exactly where they stood immediately before Aug. 4’s jobs report sent them tumbling.

On balance, I suspect that mortgage rates might nudge higher next week. I lay out my reasons for thinking this below. But I have a low level of confidence in these weekly forecasts.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

There was a glimmer of hope last week when July’s jobs report suggested the labor market might be tightening. When, in this space, I asked whether this might have been the start of a new, downward trend for mortgage rates, I answered myself: “It’s possible. But I doubt it.”

Unfortunately, that’s looking prescient. I reckon we’ll need to see persistent signs of a slowing economy alongside continuing falls in inflation before mortgage rates move decisively slower. And that scenario looks unlikely anytime soon.

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

This week’s inflation reports (the consumer price index (CPI) and producer price index (PPI)) weren’t bad. But they weren’t sufficiently good to set investors’ pulses racing. And there are very few signs that the economy is slowing.

Only a few months ago, I was regularly writing that a recession was our best hope for lower mortgage rates. And, back then, I thought one would probably arrive soon.

But I doubt that now. The economy is surprisingly robust. And even the recent tightening in the labor market had only a short-term effect.

Indeed, it’s looking increasingly likely that the Federal Reserve will pull off its “soft landing.” That’s when it tames inflation through interest rate hikes while managing not to trigger a recession.

Few economists thought that was a realistic prospect until recently. Now, probably most do.

What this means for mortgage rates

None of this is good news for mortgage rates. They’re largely determined by a bond market in which mortgage-backed securities (MBSs) are traded.

For mortgage rates to fall, we need a high demand for MBSs. That pushes up the prices of the bonds and pulls down their yields — and thus mortgage rates. The price-and-yield relationship is a mathematical inevitability.

MBSs are way safer than stocks. But they’re also much less profitable. So, as long as investors reckon the economy’s safe, they’ll buy more stocks and fewer bonds. And that pushes mortgage rates up.

Inflation is the other big factor in bond purchases. Investors get a fixed return on bonds. And high inflation eats away at those returns.

So, falling inflation has helped mortgage rates. But the strong economy has balanced that out — and then some.

Mortgage rates are going to begin a sustained downward trend someday. That’s how markets work. But whether that’s in a few months or several years is anyone’s guess. It would take a huge shift in sentiment to trigger one sooner.

Next Tuesday

The CPI and PPI are two of three related inflation reports. And the third, the import price index (IPI), is due on Tuesday.

It’s probably the least important of the three. But it measures changes in the prices of goods landing at American ports and airports. So, like the PPI, its readings are likely to show up in a future CPI when those goods finally reach retailers’ shelves.

Also on Tuesday, we’re due to see the retail sales report for July. This is important because consumer activity accounts for a huge proportion of America’s gross domestic product. So, it’s a key indicator of how the economy’s holding up.

The consensus forecast (the median forecast for a group of specialist economists) predicts that retail sales will have climbed by 0.4% in July, compared with 0.2% in June, according to MarketWatch. Markets are expecting that 0.4% increase, but anything much higher could push mortgage rates upward. A smaller increase could pull them lower.

The rest of next week

Next Wednesday should bring a couple of indicators of how American industry was doing in July. The reports record industrial production and capacity utilization.

Also on Wednesday, we can expect the minutes of the last meeting of the Fed’s rate-setting body, the Federal Open Market Committee (FOMC). We already have a pretty good idea of the mood of that meeting. But any big surprises in the minutes could move mortgage rates.

There are a few other reports due next week but those rarely affect mortgage rates.

Only one Fed official is scheduled to speak in public next week. That’s Minneapolis Fed President Neel Kashkari. And he’s due to get to his feet on Tuesday morning. Fed speakers can have an impact on mortgage rates if their remarks surprise markets.

Economic reports next week

I covered next week’s more important reports in the previous sections.

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.

• Tuesday — July retail sales. Plus the import price index, also for July
• Wednesday — July industrial production and capacity utilization. Plus housing starts and building permits for the same month. Also, FOMC minutes
• Thursday — July leading economic indicators. Plus new jobless claims for the week ending Aug. 12

It’s a relatively quiet week. But watch out for Tuesday’s retail sales.

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

Mortgage interest rates forecast for next week

Once again, I’m going to predict that mortgage rates might rise moderately or modestly next week. I suspect we’ll continue to see signs of the economy remaining strong or maybe getting a bit stronger.

But these weekly forecasts are the least reliable I make. So, take them with a pinch of salt.

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.