Today’s mortgage and refinance rates 

Average mortgage rates only edged a bit higher yesterday. But that was enough to take them to their highest level since April.

The good news is that those rates remain exceptionally low by almost all standards. In the last 50 years, they’ve been lower than they were yesterday evening only for some months, all of them since August 2021, according to Freddie Mac’s archives.

Yesterday’s disappointing jobs report means they may rise more slowly for a while. But I suspect they’ll still move higher next week. Bond markets are closed for Columbus Day next Monday. So we’ll be back on Tuesday.

Find and lock a low rate (Oct 9th, 2021)

Current mortgage and refinance rates 

Find and lock a low rate (Oct 9th, 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?

I’d lock my mortgage rate now if I were you. Of course, nobody can see into the future. And I might be proved wrong.

But the forces trying to push those rates upward seem to me to be much stronger than those trying to drag them lower. More on those below.

Anyway, 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

All last week, I’ve been banging on in about yesterday’s employment situation report. The Federal Reserve had signaled that it would proceed with winding down (“tapering”) its cheap money (aka “quantitative easing”) policies from Nov. 3 — unless that report were truly terrible.

And those policies have probably been the single biggest factor keeping mortgage rates artificially low for the last 18 months. You may think it highly likely that those rates will rise once the Fed begins to withdraw support. Indeed, recent increases are probably largely down to the Fed’s signaling that it would.

So the question now is: Was the jobs report so bad that the Fed will delay its Nov. 3 tapering announcement, perhaps for six weeks or even longer? Unfortunately, that’s a judgment call. And observers disagree over the implications.

Yesterday, following the report, The Wall Street Journal (paywall) ran the headline, “Jobs Report Keeps Fed Taper on Track for November.” And Reuters concurred:

The Federal Reserve may move to begin reducing its support for the economy next month despite a sharp slowdown in jobs gains last month as the latest U.S. surge in COVID-19 cases crested and began to recede.

— Reuters, “Fed closes in on November bond taper after jobs report,” Oct. 8, 2021

But others, including Barron’s and Investors.com, are less certain, suggesting that a delay to tapering was still firmly on the cards.

However, bond markets (one of which largely determines mortgage rates) voted with their feet, with yields on 10-year Treasury notes — and mortgage rates — ending the day higher than they started it.

Other forces pushing mortgage rates higher

Unfortunately, even if the Fed does delay tapering, I doubt that we’ll see strong and sustained falls in mortgage rates. Because another driver of lower rates seems to be evaporating, at least for now.

Clearly, the COVID-19 pandemic was the underlying reason for lower mortgage rates. Indeed, it was it that forced the Fed to institute its cheap money policies.

And, since mid-September, the number of reported new infections in America has been dropping significantly. Investors, who’ve long feared the economic consequences of the pandemic, are suddenly in a sunnier mood. And that’s bad for mortgage rates.

Meanwhile, other factors that are unfriendly to low rates are gaining ground. For instance, higher inflation is proving much more persistent than many expected. And that is never good news for borrowing costs.

Of course, it’s always possible that something will come along that changes everything. For example, a new, virulent, virus-resistant strain of SARS-CoV 2 (the virus that causes COVID-19) might arise and reverse the current direction of the economy and mortgage rates. But let’s hope that and any other disaster on a similar scale remain unlikely.

Economic reports next week

If this week was all about employment, next week is mostly about inflation. And those are currently the two hot topics for investors.

If next week’s figures show inflation persisting or rising, expect more upward pressure on mortgage rates. But watch out for another important report: September’s retail sales. Investors will likely see that as an indicator of the strength of the economic recovery.

Wednesday brings the publication of the minutes of the last meeting of the Federal Open Market Committee (FOMC), the Fed’s main monetary policy body. Investors always pore over these. But, with these minutes, they’ll be looking for more clues about the timing of tapering.

None of the other economic reports listed below is likely to cause much movement in markets unless it includes shockingly good or bad data:

• Monday — Columbus Day — No reports
• Tuesday — August job openings
• Wednesday — September consumer price index (CPI) and core CPI (CPI with volatile food and energy prices stripped out). Plus publication of FOMC minutes (see above)
• Thursday — September producer price index. And weekly new claims for unemployment insurance to Oct. 9.
• Friday — September retail sales and import price index. Plus October consumer sentiment index

Watch out for Wednesday and Friday!

Find and lock a low rate (Oct 9th, 2021)

Mortgage interest rates forecast for next week

Overall, I’m expecting mortgage rates to rise again next week. But, of course, with so much uncertainty around, that’s at best an educated guess.

Mortgage and refinance rates usually move in tandem. And a gap that had grown between the two has been largely eliminated by the recent scrapping of the adverse market refinance fee.

And another regulatory change, announced this week, has likely made mortgages for investment properties and vacation homes more accessible and less costly.

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. And 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