Today’s mortgage and refinancing rates
Average mortgage rates fell yesterday. Because the markets ignored the better-than-expected employment report released that day. More on this below.
Once again, I guess that mortgage rates may not change this week… There are no attractive economic reports on the calendar. And right now I don’t see anything obvious that could push them far in any direction.
Current mortgage and refinancing rates
|Program||Mortgage rate||Annual interest rate *||Change|
|Regular 30 year fixed||2.929%||2.929%||-0.01%|
|Regular 15 year fixed||2.25%||2.25%||Without changes|
|Regular 20 year fixed||2.63%||2.63%||-0.12%|
|Regular 10 year fixed||1.95%||1,978%||-0.01%|
|30 year fixed FHA||2.695%||3.351%||-0.02%|
|15 year fixed FHA||2.369%||2.968%||-0.19%|
|5/1 ARM FHA||2.5%||3.213%||Without changes|
|30-year fixed VA||2,343%||2,515%||-0.03%|
|15 year fixed VA||2.25%||2.571%||Without changes|
|5/1 AWP VA||2.5%||2.392%||Without changes|
|Rates are provided by our partner network and may not reflect the market. Your rating may be different. Click here for a personalized quote… See our rate suggestions here…|
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Should you fix your mortgage rate today?
Last week has been a good one for mortgage rates. But according to Mortgage News Daily, they fell just 4 basis points in five business days. And the base point is only one hundredth of 1%. There is no risk that those who still hold floating rates gain weight because of the lower monthly payments or closing costs that such drops bring.
But there is a risk that they will face a sudden hike in mortgage rates, which is very real. Even without this sharp hike, Fannie Mae expects these rates to average 3.2% for a 30-year fixed rate mortgage in the first quarter of 2022. Freddie Mac expects 3.5%. And the Mortgage Bankers Association expects it to be 3.7%. Whoever you believe, most experts believe that mortgage rates will go up.
And, in my opinion, the risks of a floating preponderance outweigh the possible benefits. So, my personal recommendations still apply:
- LOCK if closing 7 days
- LOCK if closing fifteen days
- LOCK if closing thirty days
- LOCK if closing 45 days
- LOCK if closing 60 days
However, with so much uncertainty at the moment, your instincts can easily turn out to be as good as mine – or even better. So be guided by your instinct and personal risk tolerance.
What drives current mortgage rates
The New York Times published a good essay yesterday by Julia Coronado, formerly an economist on the Federal Reserve Board and now a professor at the University of Texas at Austin. She explored the new type of economic recovery we are now seeing that is based on more generous support from individual Americans and businesses. And she paid tribute to the Trump and Biden administrations for adopting such a policy.
Incidentally, she also explained why yesterday’s excellent employment report did not spark fireworks in the markets:
More traditional policy advisers, very loudly worried about inflation on television, may be right that we will see more persistent inflationary pressures, but markets generally vote in favor of the Fed’s assessment that the heat will be largely transient. Interest rates remain low, which does not seem to indicate that the creditworthiness of the United States is in question.
– NYT, “This is why this economic recovery is shaming the 2009s.»(Paid access), July 2, 2021
In other words, there are enough investors at this point to give the Fed their head. And they believe the central bank will follow through on its current policies.
Not from the forest
For several months now, this has been true of the bond markets in general – and the one that determines mortgage rates in particular. This is why these rates were only random and limited.
But trade based on belief in institution is inherently fragile. And it may take something very small to completely change the mood: a straw that breaks a camel’s back.
Mixing metaphors, what happens if a little Dutch boy takes his finger off the Fed Dam? We cannot be sure. But we may well see the Fed being forced to slow down and then stop buying assets that currently support artificially low mortgage rates.
Meanwhile, as long as investors maintain their faith in the Fed, mortgage rates are likely to drift. A few weeks are bound to be good. But most experts expect the overall heading to be (slightly) higher.
It’s possible that yesterday’s job report made the Dutchman remember his finger. And there is still potential for that in future employment and inflation reports.
But this only applies as long as the economic recovery continues. It looks safe right now. And the Fed is forecasting 7% growth in 2021, the highest since the early 1980s.
However, the future is never certain. And something can happen that suffocates this recovery. For example, some fear the possible emergence of a vaccine-resistant variant of SARS-CoV-2, the virus that causes COVID-19. If this or some other significant event happens, mortgage rates may well fall.
But deciding when to keep or block your mortgage rate is all about weighing the probabilities. And it seems unreasonable to me to bet the size of your future monthly payments in such an unlikely scenario.
Economic reports next week
The event on next week’s calendar that is likely to impact mortgage rates is not an economic report at all. This is Wednesday’s release of the minutes of the last meeting of the Federal Open Market Committee (FOMC). It is the main policy body of the Federal Reserve System.
Investors and analysts always keep a close eye on these minutes. But they will be especially interested in these latter because they will open up discussions about future interest rate hikes and reduced asset purchases. They record the position of certain senior Fed officials on this important issue.
None of the actual economic reports listed below are unlikely to cause much movement in the markets unless they include shockingly good or bad data. Moreover, regular readers know that in recent months, investors have ignored most economic reports. Thus, the following effects may differ from the usual ones:
- Tuesday – June Institute of Supply Management (ISM) Service Index
- Wednesday – FOMC Meeting Minutes and Jobs in June
- Thursday – Weekly new claims for unemployment insurance until July 10th.
Wednesday will be a big day with its FOMC minutes next week.
Forecast of interest rates on mortgages for the next week
Once again, I’m waiting for this mortgage rates may remain stable or close to stable next week…
Mortgage and refinancing rates usually change at the same time. But keep in mind that refinancing rates are currently slightly higher than mortgage rates. This gap is likely to remain fairly constant as they change.
Meanwhile, a recent legislative change has made the bulk of investment property and vacation home mortgages more expensive.
How the mortgage interest rate is determined
Mortgage and refinancing rates are usually determined by prices in the secondary market (similar to the stock or bond market) where mortgage-backed securities are traded.
And this is highly dependent on the economy. Thus, mortgage rates are usually high when things are going well and low when the economy is in trouble.
But you play a big role in determining your own mortgage interest rate in five ways. You can significantly influence this:
- Find the best mortgage rate – these vary greatly from lender to lender.
- Improving your credit score – even a small jump can make a big difference in your rates and payments
- You will save the largest down payment – lenders like you will have real skin in this game.
- Keep your other loan modest – the smaller your other monthly commitments, the more mortgage you can afford.
- Choose your mortgage carefully. Are you better off taking a regular loan, FHA, VA, USDA, large or other loan?
Taking the time to get these ducks in a row can result in you winning lower rates.
Remember, this is not just a mortgage rate
Be sure to calculate all the upcoming homeownership costs when deciding how much mortgage you can afford. So focus on your PETE. It’s yours Principal (pays the amount you borrowed), Iinterest (borrowing price), (property) Taxes, and (homeowners) Iinsurance. Our mortgage calculator can help with this.
Depending on your type of mortgage and the amount of your down payment, you may also have to pay for mortgage insurance. And that can easily translate into three-digit numbers every month.
But there are other potential costs too. Therefore, you will have to pay the dues to the homeowners association if you decide to live somewhere with an HOA. And wherever you live, you should expect repair and maintenance costs. When something goes wrong, there is no owner to call!
Finally, it will be difficult for you to forget about the closing costs. You can see them in the Annual Percentage Rate (APR) that you specify. Because it effectively distributes them over the term of your loan, making it higher than your normal mortgage rate.
But you may be able to get help with these closing costs. as well as your down payment, especially if you are buying for the first time. To read:
Mortgage rate methodology
Mortgage reports get rates based on selected criteria from several credit partners every day. We get the average rate and annual interest rate for each loan type displayed in our chart. Since we average a set of rates, this gives you a better idea of what you can find on the market. In addition, we average rates for the same loan types. For example, FHA is fixed with fixed FHA. The end result is a good snapshot of daily rates and how they change over time.