Today’s mortgage and refinance rates 

Average mortgage rates rose yesterday. But only by the smallest measurable amount. And conventional loans today start at 3.063% (3.063% APR) for a 30-year, fixed-rate mortgage.

These rates were effectively unchanged this week. They barely moved on any day and those tiny changes were alternatively up and down.

Next week is especially hard to call. Because mortgage rates are even less responsive to other markets (and even their own) than usual. Will that elastic continue to stretch? Or will it snap back? I’m guessing rates might rise a bit.

Find and lock a low rate (Dec 5th, 2020) Find and lock a low rate (Dec 5th, 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?

In recent weeks, I’ve been suggesting that you might want to continue to float your rate until you’re within a week or two of closing. And that’s because I anticipate further falls in mortgage rates for some months to come.

I still think those falls are on the cards. But we may be in for a short period of rises. Read “What’s moving current mortgage rates” (below) for more details.

However, please do recognize that how long those rises last (and whether they arrive at all) can only have highly speculative answers. Right now, I’m guessing they’ll be modest and last a matter of days.

So, for now, my personal recommendations are:

• LOCK if closing in 7 days
• LOCK if closing in 15 days
• FLOAT 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 still think that the most likely scenario for mortgage rates is that they’ll move slowly and gently lower — with occasional and brief rises. But there are signs that we might see some of those rises this week.

Unresponsive rates

If mortgage rates were shadowing the markets they often track, they’d already be much higher. The yield on 10-year US Treasurys hit a low of 0.756% on Nov. 6. Yesterday, it closed at 0.969%.

But Freddie Mac again called a new all-time low for mortgage rates this week. What’s even more surprising is that mortgage-backed securities (MBSs — the securities that are directly tied to mortgage rates) have also risen. So how come consumer rates haven’t?

Well, lenders have been keeping mortgage rates artificially high. Because, if they hadn’t, they’d have been swamped with excess demand for mortgages. And that higher pricing has created a cushion against rises.

But every cushion eventually hits bottom and no longer provides comfort. So how close is this one to that? And how hard might the consequent bump be? Sadly, nobody can be sure.

New threat — Stimulus

The event most likely to trigger a rise in rates next week is the passage of a stimulus bill. Of course, there’s no certainty one will become law. But the chances are getting better. And that alone could be enough to push mortgage rates higher.

The pandemic continues to create real financial hardship for tens of millions of Americans. And putting some money in their pockets is bound to give the economy a fillip.

Other new threats

There are a couple of other things that could put upward pressure on these rates. The first happened last week and was an agreement between OPEC (Organization of Petroleum Exporting Countries) members and Russia to cap oil production. That should take some pressure off the domestic energy industry.

And the second concerns the Federal Reserve. It’s possible (but I personally doubt it) that its policy committee (the Federal Open Market Committee or FOMC) will decide to end or curb its purchases of MBSs. We’ll know its decision through an announcement on Dec. 16.

And any such curbing or ending will almost certainly push up mortgage rates sharply and for a long time to come. Indeed, strong rumors before Dec. 16 could be enough to send them higher.

As I say, I suspect this is a red herring. Will the Fed really put at risk the housing market, which is one of very few current bright spots? But others disagree with me. And you need to know of the possibility.

Pandemic

The reason I think mortgage rates have further to fall is the COVID-19 pandemic. Yesterday alone, 228,767 new cases (a record) and 2,637 deaths were reported, according to The New York Times.

And, of course, this latest surge is having a real effect on the economy. For example, California Gov. Gavin Newsom has announced new stay-at-home orders for millions in his state. And Thursday’s national employment numbers for November were deeply disappointing. Roughly 10 million Americans who lost their jobs in the spring are yet to find new work.

Mortgage rates almost always fall when the economy’s in trouble. And they rise when it’s prospering. It’s hard to think of a time when its prospects were worse.

Economic reports next week

Many of next week’s economic reports are for the third quarter of the year or October. And those periods bear no relation to current conditions. The most important and timely reports come on Thursday:

• Weekly initial claims for unemployment insurance
• November consumer price index

Friday sees the first reading of this month’s consumer sentiment index. And markets may pay attention to that, too.

Find and lock a low rate (Dec 5th, 2020)

Mortgage interest rates forecast for next week

I’m expecting mortgage rates over the next seven days to be … unpredictable. Sorry! I’m normally willing to take a stab at a prediction. And, if you put a gun to my head, I suppose I’d guess they’ll rise moderately.

But my confidence in that is low. Might that cushion (see above) still have enough “give” to protect borrowers? If so, we could see little movement. And might those threats (also above) fizzle out? Again, that could see them barely moving. And perhaps even inching lower again.

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 by 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