Today’s mortgage and refinance rates 

Average mortgage rates edged upward again yesterday. So they ended the week appreciably higher than they started it. Still, even after that poor period, they’re still in a range that counts as ultralow.

But, if last week’s trend continues for long, that will stop being the case. So will it? Nobody can be sure. But the risk is very real. And I wouldn’t wager years of higher payments when the likely winnings are so low.

So I’d lock my rate as soon as possible, certainly if I were due to close in the next 30 days. Read on for details.

Find and lock a low rate (Jan 10th, 2021) Find and lock a low rate (Jan 10th, 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?

If I were waiting to close, I’d lock now. But I’m naturally cautious. And, if you’re more comfortable with risk than I am, you could wait to see how things play out, especially if you’re not due to close for a month or so.

Before you decide, read the next section, which lays out what’s going on. But, for now, my 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

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

We’re about to see a conflict between two opposing forces. On one side, the new administration — largely unconstrained by Congress — will likely spend and borrow more money than the previous one. And that is very likely to exert upward pressure on Treasury yields and mortgage rates.

But, on the other side, the economy faces many months during which the pandemic, now raging at record levels, will inflict continuing economic damage. And that should exert downward pressure on mortgage rates.

But nobody knows which of those forces will be more influential. And just because the former won last week doesn’t mean it will continue to do so.

More than ever, there are no right or wrong answers over when to lock. And your appetite for risk might legitimately be the basis for your decision.

Spending

The incoming administration plans to provide much more generous pandemic relief, especially to poorer folk and small businesses. And, in the longer term, it has plans for spending on an infrastructure program as well as improved health care provision, universal pre-K, tuition-free community college classes and clean energy initiatives.

Don’t think that the Democratic Party’s control of the US Senate will make all that spending a given. Because much legislation requires a 60-40 majority to pass. And, with a wafer-thin advantage, the party can only be as left-wing as its most right-leaning senator. Assuming Republicans remain solid, losing just one vote will defeat any proposal.

Pandemic’s economic damage

Yesterday’s official employment situation report showed, for the first time since April, more jobs lost in a month (December) than gained. There are now “roughly 10 million fewer jobs than before the coronavirus pandemic struck,” according to Reuters.

And the economy is likely to take more pandemic-related hits for some time to come. Because COVID-19 is spreading faster than ever. Overnight, The New York Times painted this picture:

At least 3,895 new coronavirus deaths and 300,594 new cases were reported in the United States on Jan. 8. Over the past week, there has been an average of 259,564 cases per day, an increase of 40 percent from the average two weeks earlier. As of Saturday morning, more than 21,990,300 people in the United States have been infected with the coronavirus according to a New York Times database.

Coronavirus in the U.S.: Latest Map and Case Count — Updated January 9, 2021, 1:09 A.M. E.T.

And, sadly, other metrics have also been on upward trends, with 14-day changes of +29% for deaths and +11% for hospitalizations, according to the Times. COVID-19 and its economic effects are going nowhere until a large proportion of the population is vaccinated. And the rollout of vaccines has so far been painfully slow.

Economic reports next week

Here are the big economic reports to watch out for this week (all for December unless otherwise indicated):

• Wednesday — Consumer price index
• Thursday — Weekly new claims for unemployment insurance
• Friday — Retail sales. Plus industrial production and the first reading of January’s consumer sentiment index

Chances are, any of those would have to be shockingly good or bad to gain visibility amid the larger issues described above.

Find and lock a low rate (Jan 10th, 2021)

Mortgage interest rates forecast for next week

This coming week is highly unpredictable for mortgage rates. I’d like to be more helpful. But it’s just not possible right now.

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. 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 2020

Mortgage rate methodology