Today's mortgage and refinance rates
Average mortgage rates fell yesterday. And suddenly they are back in their extremely low range. Indeed one more drop like yesterday and they will be at their all time lows.
This news gives cause for optimism. But it doesn't bring any certainty. There are still forces out there trying to hike rates, and the fact that they have lost this battle lately doesn't mean they will continue to do so.
Personally, I am a careful guy and I locked my plan when I was 30 days after graduation. However, if you are brave and take risks, you can potentially save more by sticking to it.
Find and Lock a Low Rate (Jan 24, 2021)
Conventional 30 years fixed
Conventional 15 years fixed
Conventional 5-year ARM
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 (Jan 24, 2021)
COVID-19 Mortgage Updates: Mortgage lenders are changing interest rates and rules due to COVID-19. For the latest information on the impact of Coronavirus on your home loan, click here.
Should You Lock A Mortgage Rate Today?
We have now had seven working days without these rates increasing. And that changed the scene and brought the prospect of a new all-time low temptingly close.
But those seven working days were preceded by six when they just got up. And such short periods of time are poor bases for making predictions. So i can't.
What I can do is say that your next step has more to do with your willingness to take risks than an informed decision. If you're careful, you can lock up now (at an extremely attractive price) and shrug as mortgages get even cheaper. However, if you love to gamble, floating on is not a bad bet – provided you can afford losses if interest rates suddenly go up.
However, read the next section before making a decision. It might contain insights that might help. In the meantime, my personal recommendations are:
LOCK when you approach 7th DaysLOCK when you approach 15th DaysLOCK when you approach 30th DaysHOVER when you approach 45 DaysHOVER 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?
The latest mortgage rate cuts have been far too short for anyone to identify a trend. And the force trying to drive up mortgage rates hasn't gone away.
That force is the prospect of higher national debt. Further details of President Joe Biden's spending plans became known this week. And his $ 1.9 trillion proposal for pandemic aid will be on top of the $ 2.9 trillion spent on Trump-era relief last year.
And the new government won't stop there. Other similarly serious amounts are earmarked for infrastructure, health and other programs. Of course, not all will survive Congress (it takes 60 votes in the Senate to pass many laws), but the likelihood of more government spending is high.
But more government spending means more government bonds. And more government bonds almost always ultimately mean higher interest rates.
The Federal Reserve has signaled that it will not raise interest rates anytime soon. However, the yields on government bonds (Treasuries) and mortgage rates move independently of the Fed. And these could go significantly higher at any time and without notice.
It's likely that mortgage rates have stayed low in large part because another, similarly strong force is trying to bring them down. And those are the economic effects of the pandemic.
With that brake removed, mortgage rates should increase significantly. But that's not a problem yet. As Yale economist Paul Krugman wrote in the New York Times on Thursday:
And we know, as sure as we know everything about the economy, that the economy will be depressed at least into the summer and probably beyond.
– "The Corrupt, the Clueless, and Joe Biden," Paul Krugman, New York Times, Jan. 21, 2021
Good news and bad news
The good news is that after the holiday surge, new infections are emerging. And that the vaccination rollout is finally in sight. However, yesterday's e-newsletter from Comerica Bank's Chief Economist Robert A. Dye reflected the remaining economic distress:
… We remain concerned that the rough start to global vaccine distribution leaves some risk on the need for ongoing social mitigation measures. An expanded restrictive social policy could reverse the expected decline in economic activity.
– Comerica Economic Weekly, January 22, 2021
Low interest rates and mortgage rates are a common feature during difficult economic times. And economic depression is expressing it in higher government bonds to determine where mortgage rates go next.
So which one will win?
With luck, that economic darkness will subside later this year. The downside to this is that there's nothing stopping higher government bonds from hitting mortgage rates.
In the meantime, the two will likely compete against each other. And the best we can hope for is that they are largely the same, which leads to a deadlock. But there will likely be times when you dominate the news and win briefly.
And that could mean that mortgage rates are getting more volatile – up and down – than we are used to. Unfortunately, this makes it difficult to choose the ideal time to lock.
Economic reports next week
Thursday's gross domestic product (GDP) numbers are likely to be next week's key data. But Friday's personal income and expense numbers can also attract attention. The others are unlikely to cause waves in the markets unless they are shockingly good or bad.
Here are next week's key economic reports:
Tuesday – December Case-Shiller US National House Price Index Wednesday – December Durable Goods Advance Orders Thursday – First estimate of GDP for the last quarter of 2020. Plus weekly new unemployment insurance claims. And December New Homes Sales Friday – December Personal Income and Personal Expenses
With markets dominated by the pandemic and future government borrowing, all of these factors could almost be noticed, unless they differ greatly from expectations.
Find and Lock a Low Rate (Jan 24, 2021)
Mortgage rates forecast for next week
We keep our fingers crossed for a new all-time low next week. We have few reasons to expect this, however, other than natural optimism. Because mortgage rates are inherently unpredictable.
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 the 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 huge 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 commitments, 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?
If you spend these ducks in a row you can win lower rates.
Remember, it's not just a mortgage rate
Take into account all of your upcoming home ownership costs when figuring out what your mortgage can be. 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 size 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 the homeowners association membership fees if you want to live anywhere with an HOA. 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 find it hard to forget 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 you are a first time buyer. Read:
Programs to support advance payments 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 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.