Mortgage rates today, May 25, and rate forecast for next week

Today’s mortgage rates

Average mortgage rates inched lower yesterday. Unfortunately, they rose moderately over the entire week, which was disappointing. I’d been hoping for a modest fall.

Chances are, mortgage rates next week will pivot on next Friday's inflation report. Of course, nobody knows what that will say, which means I can’t predict their direction of travel.

Markets are closed next Monday for the Memorial Day holiday. So, mortgage rates shouldn't move that day and there will be no daily rates report. I'll be back on Monday.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

Today, I must report an end to the recent run of falling mortgage rates. We had three good weeks, but they rose over the last seven days.

It wasn’t a big jump and those rates were as high as they are today only two weeks ago. But hopes that we were seeing them enter a consistent downward trend now look optimistic.

Such a trend may arrive later this year. But many forecasters are now expecting much shallower falls than they were a month or two ago.

Naturally, I don’t want you to lock on days when we’re expecting lower mortgage rates. But be ready to do so when the outlook appears more gloomy.

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

Last week, I wrote, “Good news for mortgage rates has been piling up.” Sadly, I can’t say the same for this week.

Still, let’s not get carried away. The most important economic reports have been friendly toward those rates so far this month. And, if June’s jobs report and consumer price index (CPI) are similar, things could quickly get better again for mortgage rates.

Those two economic reports are arguably the most consequential for mortgage rates. But many economists’ No. 3 in that list would be the personal consumption expenditures (PCE) price index, which is due next Friday.

Mortgage rates and the Fed

The PCE price index may not be as important as the CPI but it’s the Federal Reserve’s preferred measure of inflation. So, it ain’t nothing.

Almost all reports are currently viewed through the prism of how they’ll affect Fed decisions about future cuts to general interest rates. The more likely those rates are to fall soon, the lower mortgage rates fall now.

The next Fed decision will be announced in 18 days. But virtually no experts expect a rate cut to be unveiled then. Those who trade in 30-Day Fed Funds futures are experts who put their money where their mouths are. And they are currently 99.1% sure rates will stay steady then, according to the CME FedWatch tool. The other 0.9% are betting on a small rise!

What will happen on Jun. 12 is a dump of information about the Fed’s evolving thinking. And, if that shows growing certainty of a cut in general interest rates soon, that would be good for mortgage rates.

Personally, I suspect we might have to wait for the Jul. 31 or Sep. 18 announcements before that sort of level of certainty is reached. But others may be more optimistic (or pessimistic).

Next Friday’s inflation report

Markets are expecting the April PCE price index, due next Friday, to show prices mostly holding steady compared to March, according to MarketWatch. That would be a welcome outcome for mortgage rates, though it likely wouldn’t move them far.

That’s because Wall Street trades ahead of economic reports based on such expectations. So everyone’s positioned where they need to be when actual data comes in bang on forecasts.

It’s only when there’s a gap between expectations and actuals that traders have to scramble to correct their positions. When inflation figures are lower than expected, that’s typically good for mortgage rates. When they’re higher, that tends to push them upward.

Of the four headline elements of the PCE price index, only the “core” one for April itself is expected to change from March. Core figures are the same as the all-items index but after volatile food and energy prices have been stripped out. Markets are expecting inflation in that category to slow slightly to 0.2% from March’s 0.3%.

I’ll update this brief next Thursday so you’re ready for the report.

Next week’s other economic reports

Leaving aside the PCE price index, most of next week’s reports fall into the category of ones that rarely influence mortgage rates. But there are two that do sometimes move those rates, though usually only in a limited and temporary way.

Mind you, I said that last week about two May purchasing managers’ indexes and they affected mortgage rates much more than I expected. So, nothing’s certain in markets.

The two this week that are most likely to have some limited consequences are:

• Tuesday— May consumer confidence index
• Thursday — Second reading of gross domestic product (GDP) during the first quarter of 2024

I’ll brief you on each of those on the day before they’re due.

Summary of economic reports and events 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 — Memorial Day holiday. Markets closed
• Tuesday — May consumer confidence index. Also March S&P Case-Shiller home price index
• Wednesday — Fed beige book (“Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District ...”)
• Thursday — Second reading of Q1 GDP. Plus April pending home sales. And initial jobless claims for the week ending May 25.
• Friday — April PCE report, including price index. Also, the Chicago business barometer for May.

Friday could be a pivotal day for mortgage rates 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 are likely to be most affected by Friday’s PCE inflation report. And, since I don’t know what that will say, I can’t predict how those rates might move.

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.

==y