Mortgage rates today, Dec. 16, and rate forecast for next week

Today’s mortgage rates

Average mortgage rates edged higher yesterday. But nothing could detract from what’s been an incredibly good week for those rates. And they’re very significantly lower than they were seven days ago.

There's a real risk that mortgage rates could rise next week. It doesn’t need a trigger for that to happen. A “corrective bounce” is a very common response to exceptionally sharp movements. That happens when Wall Street takes a step back and wonders whether it has gone too far: “It was great news but was it that great?”

Of course, nothing’s inevitable: sometimes there’s no bounce. And I’d be shocked if one next week were to erode more than a fraction of this week’s gains.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

Finally, I got to change my rate recommendations (below) earlier this week. Of course, there will still be periods when mortgage rates rise, perhaps including a corrective bounce. But I’m now optimistic that those rates are set on a gentle downward trend.

So, my personal rate lock recommendations are now:

• LOCK if closing in 7 days
• FLOAT if closing in 15 days
• FLOAT if closing in 30 days
• FLOAT if closing in 45 days
• FLOAT 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

What happened to mortgage rates this week? The Federal Reserve did.

The central bank went from Wall Street’s idea of the Grinch to a Die Hard-style savior in the space of two hours last Wednesday. Referring to Fed Chair Jerome “Jay” Powell, this morning’s Financial Times said, the “Fed chair has ‘out-doved’ the market and raised expectations of rate cuts.”

A couple of days ago, CNN Business simply called him “Santa Jay.” Well, he certainly showered Wall Street (and future mortgage borrowers) with gifts. Prices of stocks, bonds, oil and gold all rose while mortgage rates plummeted.

Mr. Powell strongly implied that the Fed would likely begin cutting general interest rates earlier and more frequently in 2024 than investors had been expecting. Yes, he left in place the usual caveats about future decisions being driven by economic data. But his central message caught Wall Street (and me) by surprise.

Will this euphoria last? Of course not. Markets can’t sustain this level of happiness for long. And, yesterday, mortgage rates edged higher.

Also yesterday, one Fed official, New York Fed President John Williams, appeared to row back on Mr. Powell’s remarks. He told NBC, “We aren’t really talking about rate cuts right now. We’re very focused on the question in front of us: ... have [we] gotten monetary policy to a sufficiently restrictive stance?”

But I’m not sure that the Fed’s in a position to row back all that far. And I’m now optimistic that we’ll see mortgage rates continue to fall — though fairly gently from now on — for some time to come. Naturally, that trend, if it materializes, will still be punctuated by periods of increases.

Next week

There are a couple of economic reports next week that could move mortgage rates significantly. The more important is November’s personal consumption expenditures (PCE) price index, which is due next Friday.

This is the Fed’s preferred gauge of inflation. And, when the central bank says its future rate decisions will be driven by economic data, this is what it thinks of first.

The other bumper report next week is a revision of previous gross domestic product (GDP) readings for the third quarter of this year (Q3/23). That should land on Thursday.

Unfortunately, I can’t tell you what markets are expecting from these and other economic reports next week because my usual sources (principally MarketWatch) are yet to update these.

You could try clicking that link to see if MarketWatch has done so by the time you read this. Alternatively, I’ll brief you more fully on the day before each important report is due. To keep mortgage rates low, we want both reports’ numbers to be as low as possible.

Economic reports next week

See above for details about the more important economic reports next week.

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 — December home builder confidence index
• Tuesday — November housing starts and building permits
• Wednesday — November existing home sales
• Thursday — GDP revision for Q3/23. Plus initial claims for jobless benefits for the week ending Dec. 16
• Friday — November PCE price index and other PCE data. Plus November new home sales and durable goods orders. And December consumer sentiment

Friday’s the big day next week.

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

Mortgage rates forecast for next week

Mortgage rates next week might rise. But only if there’s a corrective bounce following this week’s exceptional falls. And such bounces are common but far from inevitable.

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.