Today’s mortgage and refinance rates
Average mortgage rates inched lower yesterday, mirroring the previous day’s similarly tiny rise. However, those movements don’t reflect the week as a whole, which has been disastrous for those rates. And those for conventional 30-year fixed-rate mortgages have been above 6% since Monday.
I guess I should resume my rate predictions for the week ahead, even though current volatility means you should have minimal confidence in their accuracy — as do I. I think, on balance, mortgage rates are more likely to rise than fall next week.
Markets will be closed on Monday for the Juneteenth federal holiday. So we’ll be back with our daily reports on Tuesday.
Current mortgage and refinance rates
|Conventional 30 year fixed||6.15%||6.185%||+0.02%|
|Conventional 15 year fixed||5.072%||5.115%||-0.02%|
|Conventional 20 year fixed||6.023%||6.07%||-0.1%|
|Conventional 10 year fixed||5.375%||5.457%||-0.05%|
|30 year fixed FHA||5.867%||6.605%||Unchanged|
|15 year fixed FHA||5.291%||5.808%||-0.03%|
|30 year fixed VA||5.208%||5.427%||-0.07%|
|15 year fixed VA||5.44%||5.814%||-0.11%|
|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 have climbed sharply higher so far in June. True, there was a day when they fell significantly, too. But, overall, the month (and especially the last eight days) has been shockingly bad. Who, 18 days ago, would have thought the most popular rate would be above 6% today?
We might be in for a somewhat calmer time now markets have had a chance to digest Wednesday’s Federal Reserve announcements. Let’s hope volatility gently fades.
But I guess that mortgage rates won’t fall far or for long until inflation levels off and begins to drop. In the meantime, I reckon mortgage rate rises are likely to outweigh falls.
And so, 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
Last week, I was quoting Mortgage News Daily’s (MND’s) data, marveling that “the average rate for a 30-year, fixed-rate mortgage soared by 30 basis points yesterday (a basis point is one-hundredth of 1%). In other words, they jumped from 5.55% to 5.85%.” Today, seven days later, that rate is 6.03%, according to the same source.
I’d be shocked if those rates were to continue to climb so quickly. That’s highly unlikely now that markets have digested both last Friday’s inflation data and this Wednesday’s Federal Reserve announcements.
Still, I shouldn’t be a bit surprised if they were to continue to rise but much more gently. As long as inflation remains uncomfortably hot, it will be a tough sell to get investors to buy bonds. And mortgage rates are primarily determined by the yields on one type of bond, the mortgage-backed security (MBS).
You can understand why bonds are so unattractive when inflation is running hot. Investors are buying a fixed income, a “yield.” And, with nearly all bonds (really risky ones would be the exception) currently, yields are lower than the inflation rate. So every bond bought has a real-terms (after inflation) loss baked in.
So why are investors still buying MBS and other bonds? It’s a bit like the old joke about the two hikers in the woods who encounter a bear. One changes into trainers, and the other says, “You can’t outrun a bear.” The other replies, “I don’t have to. I just have to outrun you.”
There’s a parallel with bonds. While stock markets are looking so dicey, investors crave the security of safe investments, such as MBSs. And those MBSs don’t have to deliver a real-terms profit. They just have to outrun other financial contenders in the risks and rewards they offer.
High demand for MBSs pushes mortgage rates lower. This is a bit counterintuitive. But it’s easy to grasp once you recognize that bond prices always move inversely to their yields. So higher demand = higher prices = lower yields (and mortgage rates). Lower demand = lower prices = higher yields (and mortgage rates).
What’s next for mortgage rates?
Of course, nobody can be sure what will happen to mortgage rates in the future. Those who try to peer ahead can only weigh the likelihood of different possible scenarios and extrapolate from there. No wonder experts often disagree.
I suspect inflation will continue to be high for months to come, perhaps well into 2023. That depends on various things, including how quickly the Fed’s anti-inflation measures take to work and how long Russia’s war in Ukraine drags on.
And, despite the bear metaphor, I doubt investors will be piling into MBSs until inflation has leveled out and begun to fall.
To me, that implies mortgage rates will continue to rise, though, with luck, at a more gentle pace than so far in 2022. Of course, there will always be days and weeks when those rates fall. Such periods are inevitable.
But I’m not convinced those rates will fall back to their pandemic-era and pre-pandemic levels for a very long time.
If you look back through Freddie Mac’s archives, you’ll see that 6.x% mortgage rates were common before 2008 and would often have been perceived as low. It may be that the last 14 years have been the freaky exception and that we’re returning to normalcy.
Economic reports next week
Next week is very light on economic reports. Several top Fed officials have speaking engagements, including Fed Chair Jerome Powell, who will be testifying on Capitol Hill on Wednesday and Thursday. Markets will be listening to both the tone and content of what’s said as they try to assess what the Fed might do next to tackle inflation.
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.
- Tuesday — May existing home sales
- Thursday — Weekly new claims for unemployment insurance to Jun. 18
- Friday — June consumer sentiment index, plus five-year inflation expectations. Also, May new home sales
In a quiet week, Fed speakers are most likely to move mortgage rates.
Mortgage interest rates forecast for next week
Please don’t take my weekly forecasts too seriously. There’s too much volatility in markets for them to be reliable. But I’m guessing mortgage rates might move a little higher next week. Even if I’m wrong over timing, I’d expect slightly higher rates soon.
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.