Today's mortgage and refinancing rates
Average mortgage rates fell again yesterday. That's good news. But it's far too early to treat the recent declines as a trend. It is possible for them to become one. However, I suspect that it is more likely that these rates will rise again soon.
What happens to the courses next depends on a number of things that I'll explore below. But I shouldn't be surprised if Mortgage rates go up overall next week.
Find and lock a cheap rate (October 2, 2021)
Current mortgage and refinancing rates
Effective interest rate*
Conventional 30 years
Conventionally fixed for 15 years
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 (October 2, 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?
Whether or not you should lock your mortgage rate today is a difficult decision to make. After all, prices have fallen in the last few days.
But this week's lows are higher than last week's highs. And there are many more reasons right now why these rates should rise again while few are likely to keep them falling for much longer.
My personal recommendations therefore 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?
With regard to the stock market, CNBC suggests a list of investor concerns: "The Federal Reserve and interest rates are paramount, but investors will also focus on Covid, the debt ceiling, China's Evergrande and inflation."
We should add employment to that list. And next Friday, the official monthly employment report will appear. That will tell us how many new jobs were added to the country's extra-agricultural payroll in September, and what the unemployment rate was that month.
This is arguably the most important of all economic reports at the moment. And next Friday's edition could be even more influential than usual for reasons we'll get into in a moment. But let's go through CNBC's list first …
These are the things that are most likely to move the markets, including those for Mortgage-Backed Securities (MBS), a type of bond that is instrumental in driving mortgage rates:
Federal Reserve – The Fed has signaled that it is very likely to begin weakening its cheap money policy on November 3rd. These were mainly responsible for the low mortgage rates over the past 18 months. And if it slows its MBS purchases from its current $ 40 billion a month, it will almost inevitably drive up mortgage ratesinterest charges – The Fed says it currently plans to raise its interest rates (and therefore the non-mortgage rates in general) in 2022, ahead of the 2023 date it announced earlier. The faster the economic recovery, the sooner these rates are likely to riseCOVID-19 Another reason mortgage rates have been so low over the past 18 months is because investors fear the economic damage the pandemic could wreak. But national new infection rates have dropped significantly since mid-September, dispelling some of those fearsDebt ceiling – This could prove to be the biggest threat to low mortgage rates anywhere. If Congress doesn't raise the debt ceiling, the US will default on its debts for the first time ever sometime between October 15 and 18, and all adjustable rate mortgages beyond their initial fixed-rate termChina's Evergrande – This huge real estate company is about to collapse. And its debt is $ 300 billion. If the Beijing government doesn't save it, some expect a "Lehman Brothers moment". You will remember that it was the bankruptcy of this American bank that many believe caused the 2008 credit crunch and the global Great Recessioninflation – The latest consumer price index showed that these prices rose by 5.3% for the year ending July. In June it was 5.4%. But these months are the highest inflation rates since 2008. The Fed still considers this inflation to be temporary. But every month, when inflation rates stay high, pressure is on the Fed to raise interest rates and curb its cheap money policy faster than planned.
Of course, any of these can get worse or better. And so much uncertainty explains why investors are nervous and markets are volatile.
Employment report next week
The employment report for September is due out next Friday, October 8th. And the Fed has said that only really bad numbers will likely keep them from scaling back their cheap money programs as planned.
So next Friday is a crucial day for mortgage rates. Note, however, that even a disappointing or poor report is unlikely to delay this rejuvenation. Because only a disaster is likely to keep the Fed from taking action on November 3rd.
Could mortgage rates fall again?
I've said since mortgage rates went up that we'll see days and periods of time when they go down. But I doubt that they will fall back significantly or sustainably in the foreseeable future.
That is of course not impossible. There is an ever-present danger that an unexpected disaster will come out of nowhere and plunge us into economic collapse or something like that. And that would likely translate into lower mortgage rates.
But such a catastrophe is currently unlikely. And you certainly shouldn't base your decision on whether or not you are setting your rate on such an extremely unlikely event.
Economic reports next week
By far the most important economic report next week is the employment situation on Friday. And we've already covered that above.
None of the other economic reports listed below are likely to cause much movement in the markets unless they include shockingly good or bad data:
Monday – August Factory Orders Tuesday – September Institute for Supply Management (ISM) Services Index Wednesday – September ADP Employment. Sometimes this is seen as the guiding light for Friday's much more important, official employment report. Thursday – Weekly new applications for unemployment insurance by October 2nd, payslips, unemployment rate and average hourly wage
Find and lock a cheap rate (October 2, 2021)
Mortgage rates forecast for next week
I expect Mortgage rates are expected to rise again overall next week. But the week can start with falls. And if you read all of the above, you can see the level of uncertainty that surrounds the markets. So no prediction I can make is much better than a guess.
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.
And another regulatory change announced this week likely made investment property and vacation home mortgages more accessible and affordable.
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. And you can significantly affect 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 To Be Real In This Game Keeping Your Other Borrowings 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!
Eventually, you will find it 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. For example FHA fixed with FHA fixed. The result is a good snapshot of the daily rates and how they change over time.