Today’s mortgage and refinance rates 

Average mortgage rates ended the day (and the year) on Thursday immediately adjacent to their all-time low.

We’ve grown used to rates barely moving in recent weeks. But that might soon change. And it’s possible we’ll see more volatility in the coming week. Read on to explore why things could soon be different.

Find and lock a low rate (Jan 2nd, 2021) Find and lock a low rate (Jan 2nd, 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?

Next week presents more dangers for low mortgage rates than we’ve seen recently. Of course, that doesn’t mean we’ll necessarily encounter greater volatility. After all, recent weeks have brought events that would normally have moved these rates but have left them unchanged. But it means it’s more likely.

Read the following section for the risks next week brings.

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

So why do I think there may be more volatility next week? Well, there are two main reasons.

1. The Senate runoffs

The most likely causes of higher rates are the Senate runoffs in Georgia on Tuesday. If both the Democratic candidates win (and FiveThirtyEight today suggests they each have a very small lead) control of the US Senate will pass to their party.

That would give Democrats a clean sweep of the White House and both houses of Congress. And would almost certainly mean much more generous pandemic relief programs.

Investors would like that prospect. And both yields on Treasury bonds and mortgage rates might well rise. How big any increase would be or how long it would last is anyone’s bet.

Just as with the presidential election, it may take days or longer to call the runoffs. And, during that time, rates may be buffeted by emerging news stories about how the count is progressing.

Should you take a chance on a GOP win (it needs only one seat to keep control of the Senate) by continuing to float? That depends on how keen a gambler you are.

2. Employment data

The other possible influence on mortgage rates next week is employment data. The monthly employment situation report is out on Friday. And in the current circumstances, many economists regard it as the most important of all economic reports.

Better-than-expected figures could see mortgage rates rise. But worse ones could put downward pressure on those rates.

Pandemic

I still think mortgage rates will likely go lower during the first half of 2021. And the reason is the pandemic.

Yes, newly reported cases and deaths have declined over the holiday period. But that’s likely partly down to disrupted reporting processes. And hospitalizations were up 10% over the two weeks leading up to New Year’s Eve, according to The New York Times.

Worse, unwise social mixing over the holidays is likely to see new cases rise. So the picture until the vaccines begin to have a serious effect probably won’t be pretty.

Vaccine problems

And the administering of vaccines is already hitting logistical problems. Federal officials had set a target of 20 million inoculations by the end of 2020. But the actual number was 2.8 million.

Of course, some of the teething problems will be resolved. But some serious experts reckon things won’t get back to normal until the third — or even fourth — quarter of this year. Meanwhile, the economic harms caused by the pandemic will be piling up.

And, of course, mortgage rates tend to be lower during periods of economic distress. So I suspect we have some months of low rates to come. But January may not be one of them.

Economic reports next week

The big reports this week will likely be the ones concerning employment. But others may have an impact (all relate to December unless otherwise indicated):

• Monday — November construction spending
• Tuesday — Institute of Supply Management (ISM) manufacturing index
• Wednesday — ADP employment report. Plus November factory orders
• Thursday — Weekly new claims for unemployment insurance. Plus ISM services index
• Friday — Employment situation report

Wednesday also brings the publication of the minutes of the last meeting of the Federal Reserve’s policy body (the Federal Open Market Committee). Investors will pore over those for further insights into the members’ expectations for the economy and policy options. And there’s a chance that what they glean could feed into mortgage rates.

Find and lock a low rate (Jan 2nd, 2021)

Mortgage interest rates forecast for next week

This week may bring more volatility to mortgage rates. That’s not guaranteed. But it would be no surprise.

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