Today's mortgage and refinancing rates
Average mortgage rates fell again yesterday. But only by the smallest measurable amount.
Those rates would likely have risen this week had it not been for the abolition of the "unwanted market refinancing fee" that applied to most Fannie and Freddie refinances. The abolition of this has lowered the average rate somewhat. So, I guess Average mortgage rates could go up slightly next week. But that's just based on my interpretation of the mood in the markets. Read on to discover a potential threat that could lead to a bigger surge starting next Wednesday.
Find and lock a cheap rate (July 24, 2021)
Current mortgage and refinancing rates
Effective interest rate*
Conventional 30 year celebration year
Conventionally 15 years of fixed year
Conventional 20 years old
Conventionally fixed for 10 years
30 years permanent FHA
Fixed FTA for 15 years
5/1 ARM FHA
30 years of permanent VA
15 years fixed VA
Prices are provided by our partner network and may not reflect the market. Your rate can be different. Click here for an individual price offer. View our rate assumptions here.
Find and lock a cheap rate (July 24, 2021)
COVID-19 Mortgage Updates: Mortgage lenders are changing interest rates and rules due to COVID-19. Click here to learn how the coronavirus could affect your home loan.
Should You Lock A Mortgage Rate Today?
On Thursday, Freddie Mac's weekly mortgage rate report showed they were within striking distance of January's all-time low. (More, including numbers, below.) You can interpret this in two ways. You can say to yourself:
"Excellent! Maybe they'll go further down. I'm waiting to lock my rate" "Excellent! Better the sparrow in hand than the pigeon on the roof. So I'll lock up now and get one of the best deals in history. And so I avoid the risk that they will rise again. "
To be honest, either is a reasonable response. But I would prefer the second. That's partly because I'm a pretty cautious guy. But also because I still think mortgage rates will soon rise rather than fall.
Due to my preference for option 2, my personal recommendations remain:
LOCK when close in 7th DaysLOCK when close in fifteen DaysLOCK when close in 30th DaysLOCK when close in 45 DaysLOCK when close in 60 Days
With so much uncertainty right now, however, your instincts could turn out to be as good as mine – or better. So let your gut instinct and your personal risk tolerance guide you.
What is driving current mortgage rates?
You and I spend a lot of time pondering the likelihood of future scenarios and their potential impact on mortgage rates. So let's take some time to see where things are from a practical point of view.
But first, endure a little strange jargon with me, please. Percentage differences can be measured in "basis points". And a basis point is one hundredth of 1%. So yesterday's decline in mortgage rates was 1 basis point according to the Mortgage News Daily figures, which is essentially undetectable to a consumer.
People in finance use basis points for good reason. If I were to say "Mortgage rates rose 1% yesterday," you would not know whether that rate rose from 2.78% to 3.78% (2.78% + 1% = 3.78%) or whether it has risen to 2.801%. which equals 2.78% + (1% of 2.78%) or 100 basis points. It could be either.
Mortgage rates are incredibly low
So with that knowledge, let's look at some numbers. The lowest weekly interest rate on a 30-year mortgage recorded by Freddie Mac since the tracking began 50 years ago was 2.65% on January 7, 2021. These interest rates then rose. And they hit a high of 3.18% on April 1st. But since then they have been going down for most of the weeks. And this week, July 22nd, it was 2.78%.
Impressive! That 2.78% is only 13 basis points higher than the all-time low. And it's 40 basis points below this year's high. If we only have a few more days of the more severe falls we've seen in the past few weeks, we could hit it – or even beat it.
But wait. An all time low is just a number. And chasing after him can be stupid. How many people do you think chose on January 7th in the event that rates even drop below 2.65%? A lot, I would guess. And they all ended up setting a higher rate. Maybe 2.79% where it was a week later on Jan 14th.
You see my point. If you can get a much better deal than you could have dreamed of a year ago, when Freddie's monthly average was 3.02%, or 20 years ago (6.49%) or 40 years ago (16.82%) – No, really typo), then the hunt for an artificial number may be a fruitless undertaking.
The Fed threatens low mortgage rates
Regular readers will think that I am a broken record. But I need to explain again why the Federal Reserve is a threat to low mortgage rates. And why it is only possible that the Fed will let it rise sharply from next Wednesday (July 28).
First the why
The Fed is currently buying mortgage-backed securities (MBSs, the bonds that actually determine mortgage rates) for $ 40 billion a month. And that keeps these prices much lower than they otherwise would be.
But the Fed is coming under increasing pressure, both internally and externally, to "reduce" (gradually slow down and eventually stop) its purchases of MBS and similar assets. Unfortunately, MBSs are the earliest at risk as the Fed is well aware of how hot the real estate market is now, in part due to its subsidizing mortgage rates.
Second, the when
The Fed's powerful monetary policy body is called the Federal Open Market Committee (FOMC). And it will meet next Tuesday and Wednesday. There will be an explanation and some dates that will be released at 2pm. (ET) on Wednesday followed by a press conference 30 minutes later.
And there is a real possibility that this could include an announcement to reduce MBS purchases. It is probably not likely, but it is certainly possible. So if you're still floating, then this is the time to probably keep an eye out for such an announcement. Because if one comes, it could quickly lead to higher mortgage rates. At least that was the last time the Fed announced a similar reduction in 2013.
Economic reports next week
There are some heavy hitters on the calendar for next week's economic reports. In the first place is the first estimate of the gross domestic product (GDP) from Thursday for the second quarter of 2021 (Q2). Then Friday brings the others: the labor cost index for Q2; June personal income and consumer spending; and core inflation for the same month.
None of the other economic reports listed below are unlikely to cause much movement in the markets unless they include shockingly good or bad data. Additionally, regular readers know that investors have ignored most of the economic reports in the past few months. Therefore, the effects of the following may differ from the usual ones:
Monday – June New Home Sales Tuesday – June Durable and Non-Defense Capital Goods Orders. Plus July Consumer Confidence Index Wednesday – FOMC (Fed) announcement and press conference (2 p.m. and 2:30 p.m. ET) Thursday – Q2 GDP (first estimate). Plus weekly new unemployment insurance claims through July 24th, Friday-June personal income, consumer spending, and core inflation. Plus employment cost index Q2. Also index of consumer sentiment in July
Markets are fixated on inflation and the course of economic recovery. So, all of the things I mentioned in the opening paragraph of this section, as well as consumer sentiment and confidence indices, can have an impact on mortgage rates.
Find and lock a cheap rate (July 24, 2021)
Mortgage rates forecast for next week
I guess that Mortgage rates could drive a little higher this week. But that's little more than a gut feeling. And they could go much higher if the FOMC announces next Wednesday that it will be scaling back its purchases of MBSs (see above).
Mortgage and refinancing rates usually move in parallel. And a gap that had grown between the two was largely closed with the recent abolition of the disadvantageous market refinancing fee.
This is how your mortgage rate is determined
Mortgage and refinance rates are generally determined by prices on a secondary market (similar to the stock or bond markets) where mortgage-backed securities are traded.
And that depends heavily on the economy. So mortgage rates are typically high when things are going well and low when the economy is in trouble.
But you play a huge role in determining your own mortgage rate in five ways. You can significantly influence it by:
Rummage For Your Best Mortgage Rate – They Vary A Lot From Lender To Lender Improve Your Credit Score – Even A Small Boost Can Make A Big Difference To Your Interest Rate And Payments Save The Biggest Down Payment You Can – Lenders Like You Real Skin Yourself In This Game Other Borrowing Modest – The lower your other monthly obligations, the higher the mortgage you can afford. Choose Your Mortgage Carefully – Are You Better Off With A Conventional, FHA, VA, USDA, Jumbo, Or Other Loan?
The time you spend getting these ducks in a row can result in you winning lower prizes.
Remember, it's not just a mortgage rate
Remember to count all of the upcoming home ownership costs when figuring out how much a mortgage you can afford. So concentrate on your "PITI" This is yours P.rincipal (pays back the amount borrowed), IInterest (the price of borrowing), (property) TAxles and (homeowners) IInsurance. Our mortgage calculator will help you with this.
Depending on your mortgage type and the amount of your down payment, you may also need to pay for mortgage insurance. And that can easily reach three digits every month.
But there are other potential costs as well. So you have to pay community contributions if you choose to live with an HOA. And wherever you live, you have to expect repair and maintenance costs. There is no landlord to call if something goes wrong!
After all, it's hard to forget about closing costs. You can see this in the specified annual percentage rate (APR). Because this effectively spreads it over the term of your loan and is thus higher than your pure mortgage interest.
But you may be able to get help with these closing costs and your down payment, especially if you are a first-time buyer. Read:
Down payment assistance programs in each state for 2021
Mortgage rate methodology
The mortgage reports receive daily interest rates based on selected criteria from multiple credit partners. We'll find an average interest rate and an APR for each type of loan shown on our chart. Since we average a range of prices, this will give you a better idea of what you might find in the market. In addition, we determine average interest rates for the same types of credit. Example: FHA fixed with FHA fixed. The result is a good snapshot of the daily rates and how they change over time.