Today's mortgage and refinance rates
Average mortgage rates rose again yesterday. The week started so well with two rewarding falls. But three climbs followed. And prices closed a little higher on Friday than seven days earlier.
Without something significant and unexpected, I can't see the general uptrend coming to an end anytime soon. And I expect mortgage rates could go up next week. Of course I hope I was wrong. But sunny optimism is currently in short supply.
Find and lock a low rate (March 6, 2021)
Current mortgage and refinancing rates
Conventional set for 30 years
Conventional 15 years fixed
Conventional set for 20 years
Conventional 10 years fixed
Fixed FTA for 30 years
Fixed FTA for 15 years
5 years ARM FHA
30 years permanent VA
15 years fixed VA
5 years ARM VA
Prices are provided by our partner network and may not reflect the market. Your rate could be different. Click here for a personalized price offer. See our tariff assumptions here.
Find and lock a low rate (March 6, 2021)
COVID-19 Mortgage Updates: Mortgage lenders are changing interest rates and rules due to COVID-19. For the latest information on how coronavirus is affecting your home loan, click here.
Should You Lock A Mortgage Rate Today?
I would lock my plan asap if I were you. Yes, there is always the possibility that something big will come up that will change everything. But I can't see such a savior on the horizon. And it seems much more likely that there will be more increases.
So my recommendations remain:
LOCK when you approach 7th DaysLOCK when you approach 15th DaysLOCK when you approach 30th DaysLOCK when you approach 45 DaysLOCK when you approach 60 Days
With so much uncertainty right now, however, your instincts could easily prove to be as good as mine – or better. So let your gut and your personal risk tolerance guide you.
What is driving current mortgage rates?
We have been forecasting higher mortgage rates for some time. However, we figured they'd be more likely to step in later in 2021.
At that point, we expected the post-pandemic economic recovery to really pick up pace. And a strong economy and higher rates go together like a horse and a carriage – much more than love and marriage.
However, some economic indicators are already looking stronger. And on Tuesday, President Joe Biden announced that America is on track to offer all adult residents a COVID-19 vaccination by May, much earlier than previously thought.
So we shouldn't be surprised that mortgage rates would rise at this point. But they are more than inches. And that's because of something else.
The inflation boogeyman
The main thing that drives mortgage rates up is the fear of inflation. Investors fear that a strong recovery combined with high government debt will overheat the economy.
And traditionally, an overheated economy creates high inflation. This is important for those who invest in long-term fixed income assets such as government bonds and mortgage-backed securities. You no longer want to hold 3% mortgages in 2021 when inflation is at 10%. Because they would make a loss.
And we reminded you last week that the fear of inflation and high interest rates is anything but irrational:
Between 1978 and 1990, the average interest rate on a 30-year fixed rate mortgage never went below 10%, measured annually. And in October 1982 that rate peaked at 18.45%, according to the Freddie Mac archives.
Investors want the Federal Reserve to promise to do Operation Twist if necessary. This is a process that the Fed used in the 1960s and 1970s, and most recently in 2011 and 2012. And it's about selling your short-term assets and buying long-term ones. This shifts much of the inflation risk from the private to the public sector.
On Thursday, Federal Reserve Chairman Jerome Powell avoided oblige his organization to revive Operation Twist. All he promised was to continue acting as needed to keep the recovery on track and in balance. And the Thursday and Friday rise in mortgage rates was largely a response to his remarks.
Could we still see falls?
Yes, the possibility that markets will change direction never goes away. But it would likely take some seriously bad economic news to trigger falling mortgage rates.
The most likely scenarios are:
The emergence of a vaccine-resistant strain of SARS-CoV-2, the virus that caused the collapse of COVID-19A in stock markets – unlikely but not unthinkable
However, what are the odds that any of these (or something similarly devastating) will occur between now and your deadline?
Economic reports next week
It's a relatively quiet week for economic reports. Right, Wednesday brings the consumer price index (CPI) from February. And we've already seen that investors are obsessed with inflation right now. But it is future inflation that bothers them. And few expect fireworks from these numbers.
The markets could shake off other reports this week. However, data can have an impact if it deviates significantly from expectations.
However, here are next week's key economic reports:
Tuesday – February National Federation of Independent Business Small Business Index Wednesday – February CPI and Core CPIThursday – Weekly New Unemployment Insurance Claims. Friday – February producer price index for final demand (another predictor of inflation). Plus March consumer sentiment index (first reading)
Fed officials will not speak publicly this week. And that's because they are always silent in the run-up to their political meetings (Federal Open Market Committee). So you will not antagonize investors. But they won't calm her either.
Find and lock a low rate (March 6, 2021)
Mortgage rates forecast for next week
We may see some modest declines next week. Overall, however, I expect these to be outweighed by increases. Unfortunately I can't find any reason for optimism at the moment.
Mortgage and refinance rates usually move together. Note, however, that refinancing rates are currently slightly higher than those for purchase mortgages. This gap is likely to remain constant as it changes.
How is your mortgage rate determined?
Mortgage and refinancing rates are generally determined by the prices on a secondary market (similar to stock or bond markets) where mortgage-backed securities are traded.
And that depends a lot on the economy. Therefore, mortgage rates are typically high when things are going well and low when the economy is in trouble.
However, they play a huge role in determining your own mortgage rate in five ways. You can significantly affect it by:
Shopping for Your Best Mortgage Rate – They vary widely from lender to lender. Boost your credit score. – Even a small bump can make a big difference to your interest rate and payments. Save the biggest deposit you can. – Lenders want you to have real skin in this game of your other modest borrowings – 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 any other loan?
The time you spend getting these ducks in a row can result in you winning lower rates.
Remember, it's not just a mortgage rate
Take into account all of your upcoming home ownership costs when figuring out what a mortgage you can afford. So concentrate on your "PITI" P.rincipal (pays out the borrowed amount), Interest (the price of borrowing), (property) T.Axes and (homeowners) IInsurance. Our mortgage calculator can help you with this.
Depending on your type of mortgage and the amount of your down payment, you may also need to purchase mortgage insurance. And that can easily reach three digits every month.
But there are other potential costs. So you have to pay homeowners association membership fees if you choose to live with an HOA anywhere. And wherever you live, you should expect repair and maintenance costs. There is no landlord who can call if something goes wrong!
After all, you have a hard time forgetting about closing costs. You can see this in the Annual Percentage (APR) you provide. Because this effectively spreads it out over the life of your loan and makes it higher than your direct mortgage rate.
However, you may be able to get help with these closing costs and your down payment, especially if this is your first time buyer. Read:
Down payment assistance programs in all federal states for 2020
Mortgage rate method
The mortgage reports receive interest rates based on selected criteria from multiple credit partners on a daily basis. We'll find an average rate and an annual interest rate for each type of loan that we want to show on our chart. Since we calculate a series of average prices, this will give you a better idea of what you might find in the market. We also calculate average interest rates for the same types of loans. For example, FHA was fixed with FHA. The end result is a good snapshot of the daily rates and how they change over time.