Today’s mortgage and refinance rates 

Average mortgage rates edged lower yesterday, confirming their status as all-time lows.

With Christmas day a public holiday, next week will be a short one. And I’m expecting it to be a quiet one for mortgage rates.

Find and lock a low rate (Dec 19th, 2020) Find and lock a low rate (Dec 19th, 2020)

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?

My personal view is that mortgage rates have further to fall. But it’s unlikely they’ll move far in any direction before Jan. 2, 2021.

True, they might move up a little if Congress finally passes a pandemic relief package. But the current measures look too limited to provide a real fillip. And, anyway, most investors will already have traded on the assumption one will be passed. So I’m not anticipating a huge movement in rates.

Of course, that’s just my personal view. I may be proved wrong. And there’s a danger of more volatility ahead, probably in 2021. Read on for more information.

Still, for now, my (updated) personal recommendations are:

• LOCK if closing in 7 days
• LOCK if closing in 15 days
• LOCK if closing in 30 days
• FLOAT if closing in 45 days
• FLOAT if closing in 60 days

But 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

I mentioned earlier that things might soon get more exciting. That’s because mortgage rates might be subject to more volatility.

Why? Well, I’ve talked before about “the cushion.” That’s been created by lenders who’ve had to dampen excessive demand for mortgages and refinances by keeping their rates artificially high.

And it’s meant that mortgage rates haven’t always moved in line with markets. Instead of passing on changes, lenders have had the luxury of absorbing them.

But the cushion has now lost most of its stuffing. And lenders will soon be forced to pass on to borrowers every bump in the rates road.

The direction of rates

I’m expecting a quiet couple of weeks for mortgage rates. That’s often the case over the holiday season — absent any cataclysmic events.

Over the medium term, I still think mortgage rates have further to fall. That’s because those rates tend to be low when the economy’s in trouble.

Pandemic

And I suspect that the pandemic has more trouble in store than is generally recognized. Yes, there’s been some recovery from the terrible damage wreaked by the first wave. But the one we’re in now seems at least as bad.

We’re only beginning to see that in the economic figures. But the early signs are there of another big hit. And many think vaccines won’t get life close to normal until the second half of 2021.

If that grim scenario plays out, mortgage rates should continue to fall for months to come. But we’re talking about falls outweighing rises. There will still be periods following good news when they go up.

Brexit

Brexit is Britain’s withdrawal from membership of the European Union. Right now, the two parties are working to find a deal that will allow the UK to retain many trading privileges with the bloc.

But, if they fail, a “no-deal Brexit” will occur on Dec. 31. And that could cause such harm to the global economy that it will exert downward pressure on American mortgage rates. Just the prospect of such an outcome has pushed them lower previously. Watch the media and this space for updates.

Economic reports next week

Usually, if you see that gross domestic product (GDP) figures are to be announced, you assume they’re important. But Tuesday’s probably won’t be.

That’s because they relate to the third quarter, which is now ancient history. But it’s also because we’ve already had two readings of these particular numbers and any refinement since the second reading is likely to be minimal.

Other reports this week include:

• Tuesday — GDP. Plus sales of existing and new homes
• Wednesday — Personal income and spending
• Thursday — Weekly new claims for unemployment insurance

Wednesday’s income and spending figures are likely to be the most important of those.

Find and lock a low rate (Dec 19th, 2020)

Mortgage interest rates forecast for next week

I’m expecting a quiet week for mortgage rates. Of course, you can never be sure of such things. And there will continue to be small ups and downs. But it’s hard to imagine what could push them far.

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 constant as they change.

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. Those will be 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 2020

Mortgage rate methodology