Today’s mortgage and refinance rates
Average mortgage rates fell significantly yesterday. That made three consecutive days of falls, two of which were big ones.
Once again I’m ducking my duty of making a forecast for next week’s mortgage rates. As I wrote last week, “Flipping a coin or checking your horoscope are as likely to be as reliable guides as I currently am.” I believe, over the longer term, that mortgage rates are more likely to rise than fall. But the next seven days could go either way.
Markets are closed on Monday for the July 4 holiday. So, there won’t be a daily report that day. But we’ll be back on Tuesday.
Current mortgage and refinance rates
|Conventional 30 year fixed||5.565%||5.599%||-0.14%|
|Conventional 15 year fixed||4.994%||5.048%||-0.16%|
|Conventional 20 year fixed||5.485%||5.538%||-0.14%|
|Conventional 10 year fixed||4.79%||4.876%||-0.24%|
|30 year fixed FHA||5.844%||6.684%||-0.17%|
|15 year fixed FHA||5.058%||5.511%||-0.07%|
|30 year fixed VA||5.592%||5.826%||+0.01%|
|15 year fixed VA||5.179%||5.552%||Unchanged|
|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?
Don’t lock on a day when mortgage rates look set to fall. My recommendations (below) are intended to give longer-term suggestions about the overall direction of those rates. So, they don’t change daily to reflect fleeting sentiments in volatile markets.
Average mortgage rates ended June higher than they began it. But yesterday’s fall narrowed the gap to make it negligible.
In other words, all that month’s high drama — including six days when rates for conventional, 30-year, fixed-rate mortgages were north of 6% — came to nothing.
Still, after a disastrous first five months this year, a sideways movement was welcome. Does it herald a sustained period of worthwhile falls? Read on to discover why I doubt it.
In the meantime, 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
This is the third consecutive week that I’ve repeated this quote:
Markets are flip-flopping between recession fears and inflation fears. Today it is recession fears.
— Paul Donovan, UBS chief economist, “The Fed Chair who cried ‘wolf,’” June 22, 2022
When investors are obsessed about inflation, mortgage rates tend to rise. When they’re fixated on a possible recession, those rates tend to fall. That, in a nutshell explains why rates moved the way they did last month.
The volatility we saw in June was largely down to those competing fears. For mortgage rates, they more or less canceled each other out that month. But don’t be surprised if the volatility continues.
Recession looking more likely
According to the Federal Reserve Bank of Atlanta’s GDPNow tracker of gross domestic product (GDP), the economy shrank by -2.1% in the second quarter of 2022. Contrary to what I reported yesterday, the economy had grown by 0.37% in the first quarter, according to that tracker. Apologies for my mistake.
However, the official GDP revision, published on Wednesday, showed negative growth of -1.6% in the first quarter. Some people define a recession as two consecutive quarters of negative growth. And, if the official figures are correct about Q1 and the GDPNow numbers are right about Q2, we might already be in a recession — but only by that definition.
What’s a recession?
However, that’s not the correct definition. As I said yesterday, a recession is only officially a recession when declared so by the National Bureau of Economic Research, an independent body of economists. And there may be good grounds for it thinking this isn’t one. In an e-newsletter yesterday, Comerica Bank Chief Economist Bill Adams explained why:
U.S. real GDP may have contracted for two consecutive quarters in the first half of 2022. But unless the U.S. starts to see meaningful net job losses, this period looks more like a slump than an outright recession.
— Comerica Economic Alert, July 1, 2022
Still, you can see why investors are especially fearful of a recession. In that e-newsletter, Comerica listed some bad signs:
- The manufacturing side of the economy weakened markedly in June
- Demand for consumer goods and other manufactured products is falling after a boom …
- Inflation is weighing on sentiment and restraining consumer spending, especially on goods
Given all that, why do I still think inflation fears will eventually outweigh recession fears, keeping mortgage rates high and perhaps pushing them higher?
It’s because investors in fixed-income bonds hate inflation so much. And, while the rate of inflation has shown signs of leveling off a couple of times over the last few months, it’s hard to see serious improvements as long as Russia’s war in Ukraine grinds on. (Unless you believe it’s driven by loose monetary policy, which is a minority viewpoint now.) Read last week’s edition of this weekend report for why investors hate inflation.
While you’re reading last week’s report, check out why our current circumstances could see mortgage rates rise, even if we end up in a deep recession.
Economic reports next week
Next week is a fairly heavy one for economic reports. Friday sees the official employment situation report for June. And markets will be watching to see if the current recessionary pressures are yet affecting employment.
Wednesday brings the publication of the minutes of the last meeting of the Federal Reserve’s monetary policy body, the Federal Open Market Committee (FOMC). And those are always closely read. It also brings May’s Job Openings and Labor Turnover Survey (JOLTS), which is another important employment indicator.
The potentially most important reports, below, are set in bold. The others are unlikely to move markets much unless they contain shockingly good or bad data.
- Monday — Markets closed for Independence Day
- Wednesday — May JOLTS report; FOMC minutes; Institute for Supply Management (ISM) index for services sector
- Thursday — Weekly new claims for unemployment insurance to Jul. 2
- Friday — June employment situation report, including nonfarm payrolls, unemployment rate and average hourly earnings
Wednesday and Friday are the big days.
Mortgage interest rates forecast for next week
Once again, there’s no prediction for what might happen to mortgage rates next week. Sorry, but there’s simply too much volatility right now to make even a guess.
Mortgage and refinance rates usually move in tandem. And the scrapping of the adverse market refinance fee last year 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, 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 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:
Down payment assistance programs in every state for 2021
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.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.