Today’s mortgage and refinance rates 

Average mortgage rates unexpectedly fell yesterday. And by a worthwhile amount. They’re still a way off their all-time low, set in January. But they’re inching ever closer.

Read on for why CNBC yesterday talked of the current “mystifying bond market behavior,” which is keeping bond yields (and therefore mortgage rates) low when they would normally be rising. But I’m among those mystified. And so I’m forced to continue to say that mortgage rates next week are unpredictable.

Find and lock a low rate (Jul 17th, 2021)

Current mortgage and refinance rates 

Find and lock a low rate (Jul 17th, 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?

Mortgage rates are sinking to recent lows and aren’t a million miles off their all-time low set in January. And there are currently few signs of the rises I’ve been predicting for a while. So you may well choose to keep floating your rate.

However, the forces that should be driving mortgage rates higher haven’t gone away. And they might kick in at any time. So, avoid complacency and be ready to lock at any moment.

All this is too complicated to build into my simplified lock-or-float advice, below. So, my personal recommendations remain:

• LOCK if closing in 7 days
• LOCK if closing in 15 days
• LOCK if closing in 30 days
• LOCK if closing in 45 days
• LOCK 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

I’ve had a lot of egg on my face recently because the mortgage rate rises I’ve been predicting haven’t materialized. So it cheered me up yesterday when CNBC reported that “The bond market is defying Wall Street forecasters” with its “mystifying” behavior. So I’m not alone. It’s never fun being alone.

CNBC went on:

The bond market is not following the script many had expected this summer, which would have seen interest rates rising on the back of a booming economy. Instead, yields on longer-dated Treasurys are falling, and that can be a warning on the economy.

— CNBC, “The mystifying bond market behavior could last all summer,” July 16, 2021

That’s important because mortgage rates often shadow yields on 10-year Treasury notes. And they’ve been doing so recently.

Why this weird behavior?

CNBC suggested some reasons for the bizarre behavior:

1. Investors are positioning themselves strategically to take advantage of future events
2. Inflation might force the Federal Reserve to end its asset purchases and hike its rates earlier than planned
3. Technical reasons — Mostly that some investors are “covering short positions,” which means they’re making new bets to hedge against old ones coming back to bite them
4. A possible peak in growth — Some think the economic recovery has reached its apex and is now slowing

The article’s headline speculated that this strange behavior “could last all summer.” And it might. But none of those reasons (except No. 2) looks to me to be necessarily that enduring.

Still booming?

For example, yesterday’s weekly economic e-newsletter from Comerica Bank began, “U.S. economic data this week was consistent with very strong real GDP [gross domestic product] growth in the second quarter.” And yesterday’s June figures for retail sales were way better than expected. So, while it’s possible the recovery is slowing, there don’t seem clear grounds for believing so.

But, of course, the possibility of inflation (a byproduct of the boom) forcing the Fed to taper its asset purchases remains very much alive. Although Fed Chair Jerome Powell did a masterly job of reassuring legislators on Capitol Hill (and markets) earlier this week, markets can continue to believe him only for as long as inflation data support his narrative.

And, if the Fed does taper its asset purchases, we are likely to see a sharp rise in mortgage rates. Because that’s what happened the last time it did so.

Economic reports next week

After a couple of heavy weeks for economic reports, we were due a light one. And here it is.

None of the economic reports listed below is likely to cause much movement in markets unless it includes shockingly good or bad data. Moreover, regular readers will know that investors have been ignoring most economic reports in recent months. So the effects of the following may be different from usual:

• Monday — National Association of Home Builders’ July index
• Tuesday — June building permits and housing starts
• Thursday — June existing home sales. And June index of leading economic indicators. Plus weekly new claims for unemployment insurance to July 17
• Friday — July purchasing managers’ indexes (PMIs) from Markit for the manufacturing and services sectors

Chances are, you can snooze through this week’s economic reports. Markets are likely to.

Find and lock a low rate (Jul 17th, 2021)

Mortgage interest rates forecast for next week

Given that I’m among the mystified (see above) by recent market behavior, you’ll forgive me for sticking with: mortgage rates are essentially unpredictable next week. I’ll get back to offering proper predictions when I get my head around what’s happening.

Mortgage and refinance rates usually move in tandem. But note that refinance rates are currently a little higher than those for purchase mortgages.

However, a regulatory announcement yesterday means that gap should disappear by Aug. 1. Or perhaps, even earlier.

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 2021

Mortgage rate methodology