Today’s mortgage and refinance rates 

Average mortgage rates inched a little higher yesterday. But they ended the week just a touch lower than on Monday morning.

Mortgage rate movements next week remain unpredictable. Sustained rises are likely to begin soon. But they may start next week or further into the future.

Find and lock a low rate (May 29th, 2021)

Current mortgage and refinance rates 

Find and lock a low rate (May 29th, 2021)

COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

The uncertainty around mortgage rates remains. True, most economists and close observers expect them to rise at some point soon. But nobody knows precisely when.

That means this period during which those rates are hovering around the 3% mark might continue for a while, with small ups and downs each day and week. But there’s a danger that when they do begin a sustained rise, they could do so quickly.

And that’s why my personal 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 be guided by your gut and your personal tolerance for risk.

What’s moving current mortgage rates

Let’s take a step back and take a look at the bigger picture. According to Freddie Mac, the all-time weekly low for mortgage rates was 2.65% and occurred on January 7. And, during the current week, the average was 2.95%. The highest 2021 point was 3.18% on April 1. All those refer to averages for 30-year, fixed-rate mortgages (FRMs).

Now, nobody wants to pay the 30 extra basis points (a basis point is one-hundredth of 1%), which is the difference between the all-time low and current rates. Nor the 53 basis points that separate that record low from the 2021 high.

But a 2015 report from federal regulator the Consumer Financial Protection Bureau found that nearly half of borrowers weren’t bothering to shop around for a mortgage. And, in doing so, they risked paying more than 50 basis points more for their loan. Because ” … interest rates can span more than half a percent for a conventional mortgage for borrowers with a good credit rating and a 20 percent down payment,” said the report.

You’ll have taken my point. Namely, that millions of borrowers who are squeamish about a 50-basis-point rise in rates blithely risk that much by not comparison shopping for their mortgages. You need quotes from multiple lenders to avoid that danger.

Higher mortgage rates likely on their way

Last week, we explored the possibility of a “taper tantrum” this year. These occur when the Federal Reserve gradually reduces the assets that it buys. Those currently include about $40 billion a month on mortgage-backed securities. And these purchases are keeping mortgage rates artificially low.

But, this week, the possibility of a taper tantrum grew when Fed vice-chair Randal Quarles suggested that his organization should start plans for tapering at “upcoming meetings” of its key policy committee.

A taper tantrum could bring a sharp increase in mortgage rates. But, even if one’s avoided, we may well see moderately higher ones. Because most economists are predicting a boom this year. And those pretty much always bring higher rates.

Of course, nothing’s inevitable. And it’s possible that some cataclysmic event could end the economic recovery and force the Fed to keep buying mortgage-backed securities and other assets. But let’s hope none of those arises. Because higher mortgage rates would be preferable.

Economic reports next week

Next week, all eyes will be on Friday’s monthly employment situation report. And, if it rebounds from last month’s disappointing numbers, mortgage rates might rise that day.

But the others listed below are unlikely to cause much movement in markets unless they include shockingly good or bad data. Moreover, regular readers will know that markets have been ignoring most economic reports in recent weeks. So the effects of the following may be different from usual:

• Tuesday — May Institute for Supply Management (ISM) manufacturing index. Plus April construction spending

• Thursday — Revised productivity and unit labor costs for the first quarter. Also the ADP private-sector employment report and the ISM services index. Plus weekly new claims for unemployment insurance

• Friday — May official employment situation report, including nonfarm payrolls, unemployment rate and average hourly earnings

Once again, Friday’s the day to watch.

Find and lock a low rate (May 29th, 2021)

Mortgage interest rates forecast for next week

I was wrong with my prediction last week: mortgage rates actually fell, though only by a bit. So I’m back to saying mortgage rates are currently unpredictable. I’m pretty sure they’ll rise soon. But your guess is as good as mine when it comes to the “when.”

Mortgage and refinance rates usually move in tandem. But note that refinance rates are currently a little higher than those for purchase mortgages. That gap’s likely to remain fairly constant as they change.

Meanwhile, a recent regulatory change has made most mortgages for investment properties and vacation homes more expensive.

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.

Your part

But you play a big part in determining your own mortgage rate in five ways. You can affect it significantly by:

1. Shopping around for your best mortgage rate — They vary widely from lender to lender
2. Boosting your credit score — Even a small bump can make a big difference to your rate and payments
3. Saving the biggest down payment you can — Lenders like you to have real skin in this game
4. Keeping your other borrowing modest — The lower your other monthly commitments, the bigger the mortgage you can afford
5. Choosing your mortgage carefully — Are you better off with a conventional, FHA, VA, USDA, jumbo or another loan?

Time spent getting these ducks in a row can see you winning lower rates.

Remember, it’s 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) you’ll be quoted. 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 your down payment, especially if you’re a first-time buyer. Read:

Down payment assistance programs in every state for 2021

Mortgage rate methodology