Mortgage rates today, Oct. 7, and rate forecast for next week

Today’s mortgage rates

Average mortgage rates rose appreciably yesterday. This week, two tiny falls were swamped by three significant rises, making the last seven days a terrible time for mortgage rates.

They’re now closer to 8% than 7.5%, which is shocking. And that’s for the most qualified applicants. Many quotes will already be above 8%.

Are we past the worst of it? Well, maybe. But the drivers behind the great bond sell-off that pushed rates higher (more on that below) aren’t likely to be going away soon. So, I’m saying mortgage rates next week might rise though I hope less sharply than this week.

Current mortgage and refinance rates

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Should you lock a mortgage rate today?

Let’s hope things get easier for mortgage rates soon. But I don’t see any likely grounds for expecting those rates to fall far for long within the next several months.

So, for now, 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

What is the great bond sell-off?

Earlier in the week, I called the recent bond sell-off a mystery. And I quoted two eminent figures, including the Treasury Secretary, who admitted they were unsure of its causes.

A consensus may since have emerged among some economists of its three likely triggers:

1. The recognition, finally, by investors that the Federal Reserve and other central banks really will have to hold general interest rates “higher and for longer” than markets had expected
2. Proof (especially in this week’s extraordinary employment data) that the economy is proving much more resilient than expected in the face of Fed rate hikes
3. Concern over government deficits, which some believe cause inflation to rise

That’s not a wholly satisfying explanation, mostly on “why now?” grounds. The Fed’s been saying “higher for longer” for many months. People have been marveling over the economy’s continuing strength for even longer. And deficits have been rising for many years without triggering inflation.

Anyhow, there’s a herd mentality among investors. And, once they get an idea in their collective head, it can take a while to shift it.

As importantly, it can make sense to sell your old bonds with low yields when you can trade them in for new bonds with high yields. Why wouldn’t you?

What does a bond sell-off have to do with mortgage rates?

So, lots of bonds are being sold. And supply and demand means that lowers their prices. Unfortunately, it’s a mathematical certainty that the lower the price of a bond the higher its yield will be.

Meanwhile, mortgage rates are largely determined by the yield on a type of bond called a mortgage-backed security (MBS). So, when investors are selling all sorts of bonds in bulk, mortgage rates will rise.

Next week

The things that I listed above as drivers of the bond sell-off don’t look likely to go away anytime soon. And I’m worried that they may continue to put upward pressure on mortgage rates for some time to come.

However, there are signs that individual economic reports can still push mortgage rates higher or lower within that context. So, let’s see what coming next week.

Inflation

We have a trio of September price indexes (PIs) coming up: Wednesday’s producer price index (PPI), Thursday’s consumer price index (CPI), and Friday’s import price index (IPI). And the Magnum PI among those is the CPI.

That’s because it’s by far the most influential of the three, meaning the one most likely to move markets and mortgage rates. Indeed, it and the jobs report rival each other for the title of most important monthly report.

The CPI is broken into two. The CPI itself matters most to consumers because it reflects the prices they pay across the board. But economists and the Fed prefer “core CPI,” which is CPI with volatile food and energy prices stripped out. Removing that noisy volatility lets them see better what’s happening to underlying price trends.

Analysts (specialist economists) are currently forecasting CPI price increases to have slowed in September to 0.3% from 0.6% in August. But they expect core CPI price rises to have held steady at 0.3%. They reckon year-over-year price increases will have slowed slightly across both categories.

Those analysts’ forecasts will have already been baked into mortgage rates. So, if they prove spot on, little will probably change. But, if price rises were higher than expected, those rates might rise. And if they’re lower, mortgage rates could fall.

Other reports and events

Chances are, the CPI report will set the tone for the week. The other inflation indexes, especially the PPI, could move mortgage rates a bit — as might the few other relatively minor economic reports on the calendar. But their impact will almost certainly be on nothing like the same scale.

There’s an event on Wednesday afternoon that could affect mortgage rates. And that’s the publication of the minutes of the last meeting of the Fed’s rate-setting committee. Investors always pore over those and sometimes react to them. However, I think we probably already have a pretty good idea of what they’ll contain this time.

Economic reports next week

See the last section for details of next week’s blockbuster economic report, the consumer price index.

In the following list of next week’s reports and events, 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 or news.

• Tuesday — September optimism index from the National Federation of Independent Business
• Wednesday — September producer price index. Minutes of last Fed rate-setting meeting
• Thursday — September consumer price index. And initial claims for jobless benefits for the week ending Oct. 7
• Friday — September import price index. And October consumer sentiment index (preliminary)

Watch out for Thursday!

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

Mortgage rates forecast for next week

I suspect that mortgage rates might rise next week. But I hope less sharply than they did over the last seven days.

However, a better-than-expected CPI could change the outlook and prove my pessimism wrong.

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.