Today’s mortgage and refinance rates 

Average mortgage rates edged higher yesterday. There have been a lot of small, daily ups and downs recently. But they’ve generally canceled each other out. And Freddie Mac’s weekly averages haven’t moved at all over the last three reports.

Of course, there’s always a chance that rates will rise or fall suddenly and sharply. But it’s hard to spot a reason why they should this week. And that means the danger of continuing to float your rate may be lower than normal. But it also means the potential rewards of doing so may be lower, too.

Monday is Presidents’ Day. And US markets are closed. So our daily report will be back on Tuesday.

Find and lock a low rate (Feb 13th, 2021) Find and lock a low rate (Feb 13th, 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 currently floating my rate, I probably would lock it today or soon. That’s for two reasons. First, the possibility of a sudden, sharp rise never goes away, though it currently looks unlikely.

And, secondly, the chances of my gaining much from continuing to float look too low to make the gamble worthwhile. Of course, the possibility of a sudden fall is always there. But it’s roughly as improbable as a sudden rise.

So my recommendation is to lock if you’re closing within 30 days of closing.

• 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’ve already established that nothing much is moving current mortgage rates. They’re barely moving at all.

Of course, they’ll set off decisively one day. But precisely when is impossible to predict. Indeed, even the direction they’ll take is uncertain.

Risk of big falls

Yesterday, the S&P 500 and Nasdaq stock indexes closed at record highs. It’s been clear for a long time that the stock market generally has become increasingly divorced from economic reality.

Of course, those who make these markets would claim that they’re looking ahead to a rosy future in the medium or long term. But they have lousy records as soothsayers. And markets’ current highs are based on “confidence,” which is code for faith-based trading.

Stock market overvalued?

Also yesterday, the Federal Reserve Board revealed the “hypothetical scenarios for its 2021 bank stress tests.” And they included “asset prices dropping sharply, including a 55 percent decline in equity prices.”

Now, obviously, the Fed isn’t predicting a 55% slump in stock prices. But it takes the possibility of a significant fall seriously enough to make banks prove they could survive such an event.

And any such fall would likely drag down mortgage rates. Those who got out of the stock market would need to put their remaining money somewhere. And they’d want to buy safe or safer assets, including US Treasury bonds and mortgage-backed securities. Such extra demand would push up prices, which — as a mathematical certainty — would drive down yields and mortgage rates.

And those lower rates aren’t dependent on a stock market slump. They tend to go hand-in-hand with economic distress, which is why they’re so low at the moment. So any worsening of the economy could produce lower mortgage rates, even if the stock market continues to defy gravity.

Risk of big rises

Most economists think the economy will improve as the vaccination drive gains traction and the pandemic recedes. And that should bring higher mortgage rates. That’s probably the most likely scenario at the moment.

However, it could be months before a firm upward trend emerges. And, even then, it may be a gradual one. But, inevitably, there’s a possibility of it not happening at all.

For example, COVID-19 already has several mutations. And, were a future one to prove resistant to vaccines, that could undermine or slow the economic recovery, something that would likely bring lower mortgage rates.

All the above is a roundabout way of saying that there’s even less certainty about the future than normal. And we may one day look back on this period, when mortgage rates are becalmed, with fond nostalgia.

Economic reports next week

The big economic report next week is Wednesday’s retail sales. The others would have to be stunningly good or bad to move mortgage rates far.

Here are next week’s main economic reports:

• Wednesday — January retail sales, plus industrial production and capacity utilization. Also January producer price index, a predictor of inflation
• Thursday — Weekly new claims for unemployment insurance. Plus January housing starts and housing permits
• Friday — January existing home sales

More important than these economic reports is likely to be any legislative progress or setbacks encountered by the administration’s $1.9 trillion pandemic relief package, currently making its way through Congress. Successes may mean higher rates while failures lower ones.

Find and lock a low rate (Feb 13th, 2021)

Mortgage interest rates forecast for next week

Just as over the last couple of weeks, there’s little reason to expect sharp changes in mortgage rates this week. They’ll probably continue to move up and down just a little, going nowhere fast.

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