Today’s mortgage and refinancing rates
Average mortgage rates fell yesterday, as we predicted. But the fall was more than expected. And now they are at their lowest level in more than a month.
My best guess is that mortgage rates may rise slightly next week… But they are currently unpredictable in nature. So this is indeed a guess based on nothing more than bounces are common after what we saw this week.
Current mortgage and refinancing rates
|Program||Mortgage rate||Annual interest rate *||Change|
|Regular 30-year fixed||2.811%||2.811%||Without changes|
|Regular 15 year fixed||2.125%||2.125%||Without changes|
|Regular 20 year fixed||2.625%||2.625%||Without changes|
|Regular 10 year fixed||1.945%||1,978%||Without changes|
|Regular 5 year old ARM||3.532%||3.191%||-0.03%|
|30 year fixed FHA||2.688%||3.343%||Without changes|
|15 year fixed FHA||2.404%||3.003%||Without changes|
|5 years ARM FHA||2.5%||3.194%||Without changes|
|30-year fixed VA||2,255%||2,426%||+ 0.01%|
|15 year fixed VA||2.25%||2,571%||Without changes|
|5 years of ARM VA||2.5%||2.372%||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?
Even though this week has been relatively good for mortgage rates, I will still be locked out soon. Not on the day when it looks like these rates will fall.
Yes, this week’s moves have widened the narrow range that rates have been moving in lately. But in my opinion, the benefits of swimming are still small compared to the risks.
And therefore, my personal recommendations remain valid:
- 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
Last week I noticed that the markets did not react as usual to the employment report. And I have to report this week that the abnormality has continued in their reaction to the CPI.
It looks like investors are still willing to accept the Federal Reserve’s analysis of price increases. The Fed believes this increase is temporary and will not force it to raise interest rates or cut asset purchases earlier than planned.
If the Fed is right, this will be good news for mortgage borrowers. Because these asset purchases currently include $ 40 billion a month in mortgage-backed securities. And they artificially lower mortgage rates.
However, if the Fed turns out to be wrong and has to cut back on asset purchases early, it is likely to trigger a jump in mortgage rates.
So it’s good that the Fed is trusted by investors. But voices challenging his analysis are growing. The Washington Post explained yesterday:
Despite highest inflation In the aftermath of the 2008 financial crisis, the Federal Reserve continues to use the easy money method it adopted last year to stave off a pandemic depression. … But some well-known critics warn that surging inflation may instead fuel itself, eventually forcing the Fed to hit the brakes sharply by raising interest rates. This could cool the rise in prices, but only at the expense of plunging the United States into a new recession and destabilizing the world economy, forcing many foreign investors and borrowers to suffer huge losses.
– VaPo, “Rising US prices could shock other countries amid an uneven global recovery., “(Paid access) June 11, 2021
The last time the Fed tried to hit the brakes in 2013, mortgage rates soared.
Some good news
But in the past few days, the financial media have started reporting a new phenomenon. And that could help contain any future increases in mortgage rates.
The weak dollar seems to be attracting more and more foreign investors. Let’s see why.
Let’s say you are a UK investor living in the City of London. Over the past couple of years, £ 1 million could have bought an average of about $ 1,280,000. But on average, it will bring you $ 1,390,000 by 2021. So the weaker dollar made investing in America more attractive: because you get more out of your… um, pound.
Meanwhile, the yield on 10-year gilts (the British name for what we call Treasury bonds) was 0.711% yesterday. And on the same day, the yield on 10-year US Treasuries was 1.453%. You don’t need a Nobel Prize in Economics to understand why UK and other foreign investors look to US Treasuries.
How It May Affect Mortgage Rates
Mortgage-backed securities (MBS) are also bonds. And they usually hide 10-year US Treasuries. So if enough foreign investors invest in these bonds and MBSs, it could stall higher mortgage rates.
It is not yet clear to what extent foreign investors are already keeping mortgage rates low. And how great is their influence. But since most experts predict higher mortgage rates, it’s a good idea to have a straw to grab onto.
Economic reports next week
If the markets are oblivious to the economic reports of the past two weeks, which included employment and inflation reports, two topics that worry investors, will they be much worried about next week’s reports?
Who knows? But all the important reports are due out on Tuesday. Here are the data on retail sales, PPI and industrial production for May.
But the others listed below are unlikely to cause much movement in the markets unless they include shockingly good or bad data. Moreover, regular readers know that the markets have ignored most economic reports in recent weeks. Thus, the following effects may differ from the usual ones:
- Tuesday – May: Retail Sales, PPI and Industrial Production.
- Wednesday – May building permit and start of construction
- Thursday – May index of leading economic indicators. Plus new weekly unemployment insurance claims until June 12
So Tuesday is a big day.
Forecast of interest rates on mortgages for the next week
Mortgage rates are often recovering from what we saw this week. But the markets are so weird right now that any forecast is necessarily speculative. However, I must assume that mortgage rates may rise slightly 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 – would you rather take a regular, FHA, VA, USDA, large or other loan?
Taking the time to get these ducks in a row can help you win 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. Thus, 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. as well as 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, fixed FHA and fixed FHA. The end result is a good snapshot of daily rates and how they change over time.