Today’s mortgage and refinance rates
Average mortgage rates edged a little lower yesterday. But they closed on Friday evening just a tiny bit higher than they did seven days earlier.
It’s an exceptionally volatile time in many markets, including the one that determines mortgage rates. And pretty much anything could happen. But, if you were to hold a gun to my head, I’d guess mortgage rates next week might edge higher again.
Current mortgage and refinance rates
|Conventional 30 year fixed||3.8%||3.824%||-0.04%|
|Conventional 15 year fixed||3.139%||3.177%||-0.01%|
|Conventional 20 year fixed||3.46%||3.493%||-0.11%|
|Conventional 10 year fixed||3.07%||3.137%||-0.03%|
|30 year fixed FHA||3.899%||4.678%||-0.07%|
|15 year fixed FHA||3.154%||3.767%||-0.03%|
|5/1 ARM FHA||4.25%||4.256%||Unchanged|
|30 year fixed VA||3.937%||4.142%||-0.07%|
|15 year fixed VA||3.32%||3.662%||-0.02%|
|5/1 ARM VA||3.761%||3.217%||-0.02%|
|Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.|
Should you lock a mortgage rate today?
We’ve seen a week in which stocks and bond yields have started off soaring higher, then plunged lower, only to soar again — and all in one day.
And not just one day. We’ve been seeing this sort of thing since the Federal Reserve made its announcements on Wednesday.
It’s impossible to say how long this volatility will last. But, if you pick precisely the right moment to lock (how will you know when that is?), you just might benefit from continuing to float.
However, I think the fundamentals point to mortgage rates continuing higher. So I’d lock my rate soon.
And 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 personal tolerance for risk help guide you.
What’s moving current mortgage rates
January hasn’t been a kind month for mortgage rates. According to Mortgage News Daily’s archive, those for 30-year, fixed-rate mortgages (FRMs) closed at 3.27% on New Year’s Eve. Yesterday evening, they closed at 3.69%.
Of course, three years ago, in January 2019, they stood at 4.46%, according to Freddie Mac’s monthly archive. So keep things in perspective.
Some experts seem to think those rates are going to fall back. For example, Fannie Mae reckons that those 30-year FRM rates are going to average 3.2% during the first quarter of this year. For that to happen, rates would have to dip below 3.2% for some of the time to make up for the days so far in the quarter when they’ve been much higher.
Is Fannie right?
Of course, we need to take Fannie’s opinion seriously. But I very much doubt its team is correct.
Indeed, in a Jan. 19 statement, Doug Duncan, Fannie Mae’s own chief economist, laid out precisely the reasons for my skepticism:
The Fed has accelerated the pace at which it intends to reduce monetary accommodation, as inflation appears more resilient than initially expected. Currently, we expect inflation to run above the Fed’s two-percent target through 2023, and for the Fed to respond by tightening over that period. The resultant rise in interest rates will likely put additional stress on housing affordability measures vis-à-vis higher mortgage rates for consumers and the continued, though decelerating, rise in home prices.
— Fannie Mae, The Economy and Housing to Turn Toward ‘New Normal’ in 2022, Jan. 29, 2022
Cutting through the economic jargon, Mr. Duncan is saying what I’ve been repeating for some time. Inflation is so persistent and high that the Federal Reserve is being forced to move aggressively to stem it. And everything it does to that end adds upward pressure to mortgage rates.
To be fair, the latest Fed announcements happened on Wednesday, a week after Mr. Duncan’s statement. And he and his team weren’t to know quite how aggressively it would move.
But those Wednesday announcements included the Fed:
- Raising its own interest rates up to seven times over the rest of this year. Those rates don’t directly affect mortgage rates. But they do so indirectly
- Throwing into reverse its two-year program to keep mortgage rates artificially low. It’s been buying mortgage-backed securities (MBSs, a type of bond that largely determines mortgage rates) to achieve that. It plans to begin selling its stock of MBSs this year, perhaps starting in June
Markets are still working out the full implications of the Fed’s plans. And that’s why there’s been so much volatility since they were announced.
But, in the medium- and long-term, I can’t see how those plans can do other than add to the upward pressure on mortgage rates. Meanwhile, even without the Fed, inflation is itself another powerful upward force.
Of course, the forces that try to push mortgage rates down haven’t disappeared. And poor economic news will sometimes send those rates lower.
For example, after a bumper year for gross domestic product (GDP) growth in 2021, many expect the first quarter of 2022 to be relatively slow, owing to the Omicron variant. That, and other bad news, may well send mortgage rates down for periods.
And, of course, there’s always a possibility of something new and extremely serious arising that pushes those rates sharply lower over a sustained period. A US war with Russia over Ukraine might do that. Or a new and highly damaging variant of COVID-19. Or a stock market crash. Nothing’s certain.
But, absent one of those, I suspect mortgage rates will continue higher, with breaks for bad news, for some time to come.
Economic reports next week
The first Friday of each month brings the official employment situation report. And it’s arguably the most important of all economic reports, though it’s currently vying with inflation data for the top spot.
This week also brings, on Thursday, the ADP employment report about private-sector jobs, which is sometimes seen as a bellwether for the official report. And we also have a couple of indexes from the Institute for Supply Management (ISM).
The most important reports, below, are set in bold. The others are unlikely to move markets much unless they contain shockingly good or bad data.
- Tuesday — January’s ISM manufacturing index. Plus December’s job openings and labor turnover survey (JOLTS)
- Wednesday — ADP employment report for January
- Thursday — January ISM services index. Plus weekly new claims for unemployment insurance to Jan. 29
- Friday — January employment situation report comprising nonfarm payrolls, unemployment rate and average hourly earnings
Friday is the day to watch.
Mortgage interest rates forecast for next week
Markets are still too volatile to be sure how things will work out over the next seven days. But I think mortgage rates might move modestly higher next week.
Mortgage and refinance rates usually move in tandem. And the scrapping of the adverse market refinance fee has largely eliminated a gap that had grown between the two.
Meanwhile, another recent regulatory change has likely made mortgages for investment properties and vacation homes more accessible and less costly.
How your mortgage interest rate is determined
Mortgage and refinance rates are generally determined by prices in a secondary market (similar to the stock or bond markets) where mortgage-backed securities are traded.
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 you play a big part in determining your own mortgage rate in five ways. And you can affect it significantly by:
- Shopping around for your best mortgage rate — They vary widely from lender to lender
- Boosting your credit score — Even a small bump can make a big difference to your rate and payments
- Saving the biggest down payment you can — Lenders like you to have real skin in this game
- Keeping your other borrowing modest — The lower your other monthly commitments, the bigger the mortgage you can afford
- Choosing your mortgage carefully — Are you better off with a conventional, 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 your “PITI.” That’s your Principal (pays down the amount you borrowed), Interest (the price of borrowing), (property) Taxes, and (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 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:
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.