Mortgage rates today, Oct. 21, and rate forecast for next week

Today’s mortgage rates

Average mortgage rates fell modestly yesterday. But it’s been a ghastly week for those rates with four days of rises (some appreciable) heavily outweighing Friday’s lonely fall.

It’s pointless for me to try to forecast mortgage rates over the coming week. Markets are so jittery and volatile that they’re wholly unpredictable. So, I’m chickening out of making a prediction for next week.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

Might mortgage rates tumble and remain lower sometime in the next few months? It could happen. But I currently see no reason to expect such a change.

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

This week, we’ve seen how the uncertainty investors currently face has led to volatility in many markets, including the one that largely determines mortgage rates.

The Middle East

The most obvious area of uncertainty is what could happen in Israel, Gaza and the wider Middle East. Markets have already priced in the current level of conflict. But some fear an escalation drawing in other Arab nations — and, ultimately, the United States.

The U.S. Navy already has two carrier groups in the Eastern Mediterranean in an attempt to deter other countries from getting involved. But, yesterday, CNN ran a story under the headline, “The US is dangerously close to being pulled into a Middle East war.”

The report began with a description of our military’s involvement over the last two weeks: “A U.S. navy ship intercepts missiles launched by Houthi rebels in Yemen. Two American bases in Syria come under fire. In Iraq, drones and rockets fired at U.S. forces.”

Were the U.S. to fully engage in a Middle Eastern war, that could easily pull in other global powers. And it would probably be good for arms manufacturers and those who want lower mortgage rates, but few others.

The Federal Reserve

One area of uncertainty that’s become near-certain this week concerns a rate hike on Nov. 1. Following remarks this week by Fed Chair Jerome Powell and other senior officials in the central bank, investors are now convinced that there will be no such hike that day.

The CME FedWatch tool shows that investors in Fed Funds futures reckon there’s a 99.9% probability that the Fed will hold general interest rates steady on Nov. 1. Nobody thinks there will be a rise and (weirdly) there’s a 0.1% chance of a cut.

There’s a little more uncertainty over whether the Fed will hike general interest rates on Dec. 13, its last opportunity to do so this year. But not much. Just 19.8% of those investors are expecting one then.

Still, such high levels of confidence over the future of general interest rates have for now removed one driver of volatility for mortgage rates.

After last week’s blizzard of speaking engagements by senior Fed officials, they’ll be fulfilling none next week. They’ve entered the period of “purdah” (self-imposed silence) that occurs during the run-up to each of the central bank’s rate-setting meetings.

Next week

Two of next week’s economic reports could prove particularly influential for mortgage rates.

GDP

First up is Thursday’s first reading (of three) of gross domestic product (GDP) growth during the third quarter of this year (Q3/23). Markets are expecting that to have risen sharply that quarter to 4.5% from 2.1% during the second quarter.

Mortgage rates tend to benefit from bad economic news. And, if confirmed by the data, that outcome would be the opposite. So, watch out for the possibility of higher mortgage rates that day. But they could fall if the report is worse than expected.

Inflation

The second highly important economic report next week lands on Friday. And it is the personal consumption expenditures (PCE) price index for September.

This is an inflation report that some think rivals the all-important consumer price index (CPI). Generally, lower-than-expected inflation drives mortgage rates downward.

So, what are markets expecting? They think that the core price index (with volatile food and energy prices stripped out) will have risen in September by 0.3% compared to August’s 0.1%. But that year-over-year core price rises will have slowed to 3.7% from 3.9%.

Other

Next Tuesday brings a couple of October purchasing managers’ indexes (PMIs) from S&P. One measures activity in the services sector and the other in manufacturing.

They’re both expected to fall. And if that day’s actual figures are even worse than expected, we might see mortgage rates fall. But, if they’re better, mortgage rates could rise.

Economic reports next week

See the last section for details of next week’s most influential economic reports: GDP, the PCE price index, and a couple of less important PMIs.

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

• Tuesday — October PMIs from S&P for the services and manufacturing sectors. Plus the S&P Case-Shiller home price index for August
• Wednesday — September new home sales
• Thursday — GDP during Q3/23. Plus September durable goods orders. And initial claims for jobless benefits for the week ending Oct. 21
• Friday — September PCE price index. Plus the final reading of October’s consumer sentiment index

It’s a relatively busy week for important economic reports. So, stay alert!

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

Mortgage rates forecast for next week

Sorry, but mortgage rates really could head either way next week. And there are too many variables for me even to hazard a guess as to how they’ll 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.