Today’s mortgage and refinance rates 

Average mortgage rates rose yesterday. And the week — which had promisingly seen a new all-time low — ended up going nowhere. Because those averages were the same yesterday evening as they had been seven days earlier.

Right now, I’m not expecting mortgage rates to move sharply. It’s not impossible, but I can’t spot any obvious reasons why they should. So you probably won’t lose or gain much whether you float your rate or lock it

Personally, I don’t see the point of wagering when the rewards of winning are likely to be so low. And I’d lock my rate when I was 30 days from closing. But you might perfectly rationally take the opposite position.

Find and lock a low rate (Jan 30th, 2021) Find and lock a low rate (Jan 30th, 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?

In previous months, mortgage rates have shown a clear downward trend. But, looking back over January, rises and falls have been very close to equal, both in frequency and the size of movements.

Indeed, those averages are ending the month almost exactly where they started it. And the range within which they’ve moved has also been tight.

Assuming that situation continues through next week (and I see no reason to think it won’t), you probably stand to gain or lose little by either locking or continuing to float.

So my recommendation to lock if you’re closing within 30 days of closing is based on an abundance of caution. Why take even the small chance of something big suddenly emerging that messes things up when the rewards of floating are likely to be so limited?

• 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

There were moments over the last week when I worried I’d misread the situation. Might investors have decided to ignore the prospect of higher government borrowing, allowing mortgage rates to resume their long march lower in line with the worsening economy?

But no. Rises on Thursday and Friday suggested that those investors continue to have the concerns that have dragged those rates higher periodically during January.

More volatility?

However, those concerns are fairly evenly balanced by others over the serious harm that the pandemic is continuing to wreak on the economy. Those are trying to pull mortgage rates lower as the prospect of higher government borrowing tries to push them higher.

Across January, those competing forces were fairly evenly matched. And I’m expecting them to remain so this week. But be aware that they are likely to gain and lose prominence in investors’ minds as news items put each front and center at different times. And that could lead to more volatility.

A break with Treasury bonds

It’s worth mentioning a phenomenon that’s been around for a while. Traditionally, mortgage rates shadow yields on 10-year Treasury bonds. It’s never been a perfect relationship, but it’s been a fairly reliable constant for a very long time.

Until it wasn’t. Toward the end of 2020, we saw an unusual break that some see as dangerous. There’s always a difference (“spread”) between the two because Treasury securities are considerably safer investments than mortgage-backed securities. But that spread’s grown unusually wide in recent months.

And, were it to snap back, there could be a chance of noticeably higher rates with very little warning. Of course, that may not happen. Or, at least, not soon or quickly. But it’s another reason to err on the side of caution when deciding whether to float or lock your rate.

Economic reports next week

Next Friday sees publication of the December employment situation report, which many currently regard as the most important of all economic reports. Markets and mortgage rates may well move if its data are better or worse than expected.

The other reports next week will probably have to be shockingly good or bad to move those rates far.

Here are next week’s main economic reports:

• Monday — December construction spending
• Tuesday — January reading of the Institute for Supply Management (ISM) manufacturing index
• Wednesday — January reading of the ISM services index
• Thursday — Weekly new claims for unemployment insurance.
• Friday — December employment situation report, including nonfarm payrolls and the unemployment rate

Friday’s the big day next week.

Find and lock a low rate (Jan 30th, 2021)

Mortgage interest rates forecast for next week

Last week, we said we were keeping our fingers crossed for a new all-time low. And that turned out well. But only briefly.

Next week may see another. However, further rises are roughly equally likely.

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