Today’s mortgage and refinance rates
Average mortgage rates rose appreciably yesterday. However, that followed a couple of days of sharp fall. And the week as a whole ended much better than it started.
There really is no point in my making predictions for the next week’s mortgage rates when markets are so volatile. Flipping a coin or checking your horoscope are as likely to be as reliable guides as I currently am. One day — I hope soon — markets will settle down and I’ll be able to resume making weekly predictions.
Current mortgage and refinance rates
|Conventional 30 year fixed||5.891%||5.926%||+0.09%|
|Conventional 15 year fixed||5.143%||5.203%||+0.11%|
|Conventional 20 year fixed||5.93%||5.986%||+0.1%|
|Conventional 10 year fixed||5.373%||5.455%||+0.13%|
|30 year fixed FHA||6.132%||6.991%||+0.1%|
|15 year fixed FHA||5.382%||5.871%||+0.13%|
|30 year fixed VA||5.481%||5.707%||-0.15%|
|15 year fixed VA||5.508%||5.883%||+0.2%|
|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 are still appreciably higher than they were at the start of June. But they are in much better shape than they were mid-month. Then, the one for conventional, 30-year, fixed-rate mortgages peaked at 6.28%, according to Mortgage News Daily’s archive. That same rate closed yesterday at 5.85%. Phew!
Does that mean the monthslong upward trend for mortgage rates has finally turned around? Well, of course, it might do.
But I’m not yet buying that analysis. Those rates have been driven higher largely by hot inflation. And that’s still showing no signs of cooling anytime soon.
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
I shouldn’t have been as surprised as I was about this week’s falls in mortgage rates. I’ve repeatedly mentioned that sharp increases are frequently followed by decreases. So it wasn’t their occurrence that raised my eyebrows. It was the size of the drops that caught me unawares.
Earlier this week, I repeated the quote that I think best summed up what we’re seeing:
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
And, as long as investors are switching their focus between those two fears, we’re likely to continue to see sharp ups and down in mortgage rates. That’s because those fears prompt opposite responses among investors.
Inflation vs recession
Those buying bonds hate inflation. That’s because they get a fixed return on their investments. And, right now, that return means a real-terms (after inflation) loss. Suppose they could get a 4.x% yield on a mortgage bond (a mortgage-backed security or MBS) yesterday. In May, the consumer price index rose at rate of 8.6% year-over-year.
The smaller the demand for these bonds, the lower the price and the higher the yield. So yields and mortgage rates rise when inflation is putting people off buying MBSs.
To see what goes on under the hood, read ‘How mortgage rates are determined and why you should care’
The opposite happens when the focus switches to the possibility (likelihood, to many) of a recession.
“It [a recession] is certainly a possibility. It’s not our intended outcome, but it’s certainly a possibility.”
Fed Chair Jerome Powell quoted by AP, June 22, 2022
Then, MBSs become much more popular among investors. Suddenly, stocks seem highly risky and safer bonds represent a haven. So demand and prices rise and yields and mortgage rates fall.
When mortgage rates rise during a recession
Well, that’s true usually. As I reported yesterday, mortgage rates reached their all-time high (18.45%) during the 1981-82 recession, which was truly painful. That was because the Federal Reserve was at the time acting to tame inflation — just as it’s doing now.
Of course, nobody thinks we’ll see such outrageously high mortgage rates this time around. The economic environment is very different now from then. But I wouldn’t hold out much hope that a recession will drag down mortgage rates for long while the Fed is tackling inflation.
What’s next for mortgage rates?
All this explains why mortgage rates have been moving up and down like a Texas nodding-donkey oil rig. And it also explains why I remain pessimistic about the future of mortgage rates over the coming months.
I can’t see those rates moving lower and staying low for long while inflation remains such a problem. And I don’t see inflation going away anytime soon. It’s far from clear that the Fed’s medicine is going to cure it. And, even if it helps, we’ll likely need to see Russia’s war in Ukraine end before things begin to normalize.
Sorry to be so gloomy. I much preferred my job a year or two ago when I was serving up unrelentingly good news on mortgage rates each week.
Economic reports next week
There’s only one thing on next week’s economic calendar that is likely to move mortgage rates far. And that’s May’s personal consumption expenditure (PCE) report, which includes a suite of data, and is due out on Thursday. This is the Fed’s preferred measure of inflation. So investors will be hawklike as they scan the figures.
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 — May orders for durable goods and core capital goods. Plus pending home sales index for that month
- Tuesday — June consumer confidence index
- Wednesday — Revision of gross domestic product readings for Quarter 1, 2022
- Thursday — PCE inflation and other data. Plus weekly new claims for unemployment insurance to Jun. 25
- Friday — June manufacturing index from the Institute of Supply Management. Plus June construction spending
Watch out for Thursday’s inflation figures.
Mortgage interest rates forecast for next week
Sorry, but I’m chickening out from making a prediction for next week’s movements in mortgage rates. If you read my analysis above, you’ll know my expectations for the longer term. But volatility means I’ve no way to provide a seven-day outlook.
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.