Today’s mortgage and refinance rates 

Average mortgage rates just inched lower yesterday. Overall, they did fall this week, as I predicted.

But I got lucky. And mortgage rates are fundamentally unpredictable right now. They depend to a high degree on data concerning the Omicron variant of COVID-19. And those are only beginning to emerge. So, rates could be pushed in either direction, depending on the inferences scientists draw from those data.

Find and lock a low rate (Dec 4th, 2021)

Current mortgage and refinance rates 

Find and lock a low rate (Dec 4th, 2021)

Should you lock a mortgage rate today?

If you’re financially cautious, you might well choose to lock your mortgage rate today. Those rates aren’t looking bad right now. And there’s a real chance they’ll rise.

But, if you like to gamble — and believe the Omicron variant of COVID-19 is likely to do serious harm to the economy — you will probably wish to continue to float your rate.

Honestly, I can’t provide better guidance than that, simply because neither I nor anyone else can be sure how damaging Omicron will turn out to be. More on that below.

Earlier in the week, I changed my personal rate lock recommendations to reflect what looked, at the time, to be a real threat from Omicron. But I may well change them back soon.

Still, for now, those recommendations are:

• FLOAT if closing in 7 days
• FLOAT if closing in 15 days
• FLOAT 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

It’s still all about Omicron — for now. And two possible and competing narratives seem to be emerging. Compared to other variants, including Delta:

1. There are early signs that Omicron is spreading more quickly. But nobody’s died of it yet. And it may bring milder symptoms and many fewer hospitalizations and deaths. If it does, it may be the beginning of the end for COVID-19 as the new variant edges out Delta and all the other more dangerous ones and reduces the disease’s harms
2. Omicron seems to spread more quickly and there’s insufficient evidence to conclude that it’s any less harmful. Meanwhile, there are early signs that vaccines and previous infections provide less protection against it. So COVID-19 could be much worse this winter than last

However, the World Health Organization (WHO) pours cold water on both those narratives. “We’re going to get the answers that everybody out there needs,” WHO emergencies director Michael Ryan said yesterday. But that information could take weeks to emerge.

And the latest WHO Omicron update says, “It is not yet clear whether Omicron is more transmissible … It is not yet clear whether infection with Omicron causes more severe disease compared to infections with other variants, including Delta.”

Where Omicron has reached

So we just have to wait. Meanwhile, the Omicron variant is spreading. As of yesterday, it was in 38 countries. And cases had been reported in the following American states:

• California
• Colorado
• Hawaii
• Maryland
• Minnesota
• Missouri
• Nebraska
• New Jersey
• New York
• Pennsylvania
• Utah

So, it’s looking pretty certain that Omicron will be in a place near you soon. But we have no idea whether we should find that scary or reassuring.

What this means for mortgage rates

Reuters reported yesterday, “The International Monetary Fund is likely to lower its global economic growth estimates due to the new Omicron variant.” But, presumably, it will do so only if the variant turns out to be sufficiently harmful to trigger a new wave of economically damaging measures.

Steps such as lockdowns, school closures, increased working from home and restrictions on travel and social mixing are all likely to slow the economic recovery or reverse it. But we can’t yet be sure they will be necessary.

If they are, mortgage rates are likely to tumble, perhaps to new all-time lows. If they’re not, the recovery should continue, and the upward pressures on those rates will have free rein. Those include continuing warm inflation. And higher interest rates on all types of borrowing sooner than many expect.

Economic reports next week

Yesterday saw publication of the monthly employment situation report. Many currently regard that as the single most important economic report of all. And yet markets barely responded to it.

The headline figure (the number of jobs added to nonfarm payrolls) was much lower than expected. And you’d normally expect mortgage rates to fall appreciably on that news.

There are two possible explanations for why they didn’t. First, many of the other figures in the report were pretty good. Or, secondly, investors are too focused on the possible effects of the Omicron variant to pay much attention to passing, historical data, no matter how important it usually is.

If the latter’s the case, next week’s reports may receive similarly scant attention. But, if it’s the former, we may see some reaction to the more important ones, which cover inflation and employment.

The key ones below are in bold. But none of the other economic reports listed below is likely to cause much movement in markets unless it includes shockingly good or bad data:

• Tuesday — Third quarter productivity and unit labor costs (revisions)
• Wednesday — October job openings and job quits
• Thursday — Weekly new claims for unemployment insurance to Dec. 4
• Friday — November consumer price index and core inflation. Plus the first reading of the December consumer sentiment index and “expected inflation over the next five years“

Wednesday and Friday may be the key days — if any are.

Find and lock a low rate (Dec 4th, 2021)

Mortgage interest rates forecast for next week

Mortgage rates are unpredictable next week. Sorry for the cop-out. But they just are.

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

Meanwhile, another recent regulatory change 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