Today’s mortgage and refinancing rates
Average mortgage rates fell yesterday. And the mostly slow drift towards lower rates continues.
Mortgage rates may continue to decline next week… At least there’s nothing in my crystal ball that suggests they won’t. But with so much uncertainty at the moment, I’m working on guesswork, not on reason.
Current mortgage and refinancing rates
|Program||Mortgage rate||Annual interest rate *||Change|
|Regular 30-year fixed||2.686%||2.686%||Without changes|
|Regular 15 year fixed||1.99%||1.99%||Without changes|
|Regular 20 year fixed||2.375%||2.375%||Without changes|
|Regular 10 year fixed||1,851%||1,876%||Without changes|
|30 year fixed FHA||2,563%||3.214%||Without changes|
|15 year fixed FHA||2.34%||2.94%||Without changes|
|5/1 ARM FHA||2.5%||3.207%||Without changes|
|30-year fixed VA||2.25%||2.421%||Without changes|
|15 year fixed VA||2.125%||2.445%||Without changes|
|5/1 AWP VA||2.497%||2.385%||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…|
COVID-19 Mortgage News: Mortgage lenders are changing rates and rules due to COVID-19. For the latest information on how the coronavirus can affect your home loan, Click here…
Should you fix your mortgage rate today?
It was a great July for mortgage rates. According to Mortgage News Daily, they started the month at 3.18% (for a 30-year fixed rate mortgage) and finished at 2.84%. This is a 34 basis point drop (abbreviated as BPS – a basis point is one hundredth of 1%), which is in any book.
Indeed, 24 of those basis points were the result of a mid-month panic in the bond markets. But 10 remains, that is, the market simply follows its current trend. And, historically, the 10 BPS drop was considered a cause for celebration.
Regular readers know that none of this makes sense to me. And in normal times, mortgage rates will rise.
But I’m starting to feel like a cross between Kassandra (an ancient Trojan prophet whose statements were always accurate but never believed) and King Cnut, who famously ordered the tide to stop advancing and got his feet wet.
So today, for the first time in months, I’m changing my personal bet blocking guidelines. But I am reluctant to do this because I (and most other professional mortgage rate monitors) believe that these rates will someday begin to rise. So keep a close eye on this daily column. Because the following guidelines are subject to change at any time:
- CASTLE if closing 7 days
- CASTLE if closing fifteen days
- TO SWIM if closing thirty days
- TO SWIM if closing 45 days
- TO SWIM 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
It’s hard to say what drives the current mortgage rates. They usually rise when the economy improves and fall when it gets worse. Likewise, they tend to rise when inflation is high and decline when inflation is weak.
However, these rules do not currently apply. And it’s hard to say why.
Of course, many financial journalists offer explanations. But in my opinion, they read like rationalizations and contain too many contradictions to make a logical argument.
To understand this, you first need to recognize that bond prices and yields move in inverse proportion to each other. So when many people want to buy bonds, their prices go up, which is just supply and demand. But as a result, their yield falls. Because if you pay more for a fixed-rate security, your return on investment will be lower. In other words, the more you pay to get the same income, the less your income (profitability) will be.
Thus, today’s low bond yields are a result of more and more people buying bonds. The same goes for mortgage rates. Because they are determined by the yield on Mortgage-Backed Securities (MBS), which is a type of bond.
Why Buy Bonds?
Investors like to balance their portfolios with higher yields, riskier assets like stocks, and lower yields, safer assets like bonds. At the safest end of this range are US Treasury bills, bills of exchange and bonds. But MBS are also considered to be pretty safe.
So investors are currently stocking up on safe assets, which is why the returns on Treasury products and MBS are so low. This is understandable if you think that the economic recovery may slow down. But strangely, they are also buying stocks. Monday US Stock Market Index reach a record high… And people tend to buy stocks when economic confidence is high.
Meanwhile, even many of those currently buying bonds expect yields to rise. NASDAQ.com noted yesterday:
But record low real yields are often seen as a worrying sign as they reflect a pessimistic view of future economic growth, which is why many bondholders are not intimidated because they expect a significant recovery in economic growth this year. Fifteen of the 23 banks and asset managers surveyed by Reuters said they still expect the yield on 10-year US bonds by the end of 2021 to be around 2%.
– NASDAQ.com, “July World Bonds Show Best Month Since 2020 COVID Collapse, “July 30, 2021
The expected yield on 10-year US Treasuries at 2% by the end of this year will be a big jump. Because yesterday that yield closed at 1.23%. Most likely, mortgage rates will jump by the same proportion. And, if that happens, those rates could go up to 4% or more. Until December 31!
Just re-read this Nasdaq quote. Have you noticed the contradictions? Yes, bonds are a strange breed. But even so.
Economic reports next week
As with this week, there are many important economic reports coming out next week. But investors largely ignored this week’s results. And the same can be in the following.
The official Friday monthly employment report is likely to spark the wave. This has been a little disappointing in recent months. And next week’s best numbers could finally convince bond investors that the economic recovery is not going anywhere, which should push mortgage rates higher.
None of the other economic reports listed below are unlikely to cause strong 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:
- Monday – July Institute for Supply Management (ISM) manufacturing index. Plus construction costs in June
- Tuesday – July Sale of vehicles. Plus June factory orders
- Wednesday – ADP Private Sector Employment Report for July. Plus July ISM Service Index
- Thursday – Weekly new claims for unemployment insurance through July 31st.
- Employment report from Friday to July, including data on non-farm jobs, unemployment rates and average hourly wages.
Stay tuned for Friday’s employment report.
Forecast of interest rates on mortgages for the next week
I think with a little certainty mortgage rates may drop slightly this week… However, this is based solely on the general direction of movement in recent months. And a great employment report on Friday could raise those rates.
Mortgage and refinancing rates usually change at the same time. And the gap that has widened between the two has been largely bridged by the recent abolition of unfavorable market refinancing fees.
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 – would you rather take a regular, 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 NSrincipal (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 be expressed in 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 final costs. and your down payment, especially if you are buying an item 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 in the market. In addition, we average rates for the same loan types. For example, FHA is fixed with fixed FHA. The result is a good snapshot of daily rates and how they change over time.