Today’s mortgage and refinance rates 

Average mortgage rates nudged higher yesterday. But something odd happened that day. Markets were spooked by the prospect of an imminent Russian invasion of Ukraine. And yields on 10-year Treasury notes (which mortgage rates often shadow) fell sharply.

So mortgage rates may decrease on Monday as they play catch-up. And fall further during the week if Russia actually does invade. But, if the Ukrainian issue fizzles out, I’d expect those rates to head modestly higher.

Find and lock a low rate (Feb 13th, 2022)

Current mortgage and refinance rates 

Find and lock a low rate (Feb 13th, 2022)

Should you lock a mortgage rate today?

Personally, I’d lock on the first day on which mortgage rates look likely to rise. Because I can see no grounds to believe the upward trend for those rates will end anytime soon. Unless, of course, Russia does invade Ukraine.

Putting that possibility aside, we’ll see occasional times when mortgage rates decrease a little, including probably on Monday. But I’m not expecting those periods to last long nor to provide worthwhile falls.

True, I’d be surprised if those rates continue higher at their recent pace. And we’re probably in for a period of more gentle increases.

So, subject to events in Ukraine, my personal rate lock 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 let your gut and your personal tolerance for risk help guide you.

What’s moving current mortgage rates

Ukraine

Yesterday, I listed Ukraine among the possible but unlikely issues that could push mortgage rates lower. Later that day, President Joe Biden announced that he believed that it was likely that Russia would invade the country imminently.

To be fair, I’d said that “the United States getting dragged into a war with Russia over Ukraine” was what could cause mortgage rates to fall significantly and in a sustained way. But President Biden’s announcement was enough to cause a panic in some key markets.

And the yield on 10-year Treasury notes fell to a low of 1.913% from a high that day of 2.063%. That’s a big drop.

Now, those yields and mortgage rates are not joined at the hip. And they often drift apart. But there is usually a close relationship between the two. And we may well see mortgage rates fall on Monday as they catch up.

What happens after that will depend on Russia’s actions and the international community’s responses. If Russia, as it claims, has no intention of invading Ukraine and the whole business fizzles out, mortgage rates will probably bounce back and then continue gently higher.But a Russian invasion will likely trigger sanctions that could affect the global economy. And that might blunt future rises in those rates and drive them lower for a while.

Meanwhile, of course, a Russian invasion makes “the United States getting dragged into a war with Russia” appreciably less unlikely than I thought it was on Friday morning.

The Fed

Nearly all the changes to mortgage rates we’ve seen recently have been driven by what markets expect the Federal Reserve to do next. It’s spent two years stimulating the economy by keeping its interest rates at close to zero and by buying trillions of dollars worth of bonds, including mortgage-backed securities (MBS). Those are the type of bond that largely determines mortgage rates. And those Fed MBS purchases have been keeping mortgage rates artificially low.

Clearly, the Fed’s stimulus measures couldn’t and shouldn’t last beyond the time when they’re necessary. And we’ve known for ages that the Fed planned to begin to hike its rates and stop buying MBSs in March.

What has changed recently is the economy. The Fed has twin, core duties: to maintain both employment and inflation within acceptable bounds.

Last Friday’s employment data showed that jobs were looking after themselves, freeing the central bank to focus on inflation. And Thursday’s hotter-than-expected inflation data showed the urgency of acting aggressively.

Already, St. Louis Fed President James Bullard has signaled that he understands that imperative. When asked on Monday whether he thought a 0.5% rate hike was needed next month (as opposed to the usual 0.25% one), he replied no. But, yesterday, he told Bloomberg News he was now open to the larger increase. “We are going to have to be far more nimble and far more reactive to data,” he explained.

Mortgage-backed securities

Perhaps even more important to mortgage rates than the Fed’s plans for its interest rates is what it will do with its mortgage-backed securities. As of Wednesday, it owned MBSs worth $2.66 trillion (yes, trillion).

The last time it ended a stimulus program and had elevated holdings of MBSs, the Fed maintained those holding for more than two years before slowly selling them off. But, now, few expect it to hold off sales for long.

Indeed, some think selling could begin during the first half of this year. If buying MBSs dragged mortgage rates lower, selling them should push them yet higher.

Amid all this, I’m struggling to find even glimmers of hope for lower mortgage rates. Of course, they may well, from time to time, pause in their climb and even drop a little. But I can see no grounds for expecting significant or sustained falls anytime soon.

Unless, of course, something truly horrendous were to come along that killed the economic recovery. But none of us wants that.

Economic reports next week

Next week’s economic reports are led by January’s retail sales figures on Wednesday. We’ll also learn more that day about the same month’s industrial production. Future inflation indicators (the producer price index and the import price index) could also prove more important than usual.

Wednesday also brings the publication of the minutes of the latest meeting of the Federal Reserve’s Federal Open Market Committee (FOMC). Investors always pore over those because they often provide fresh insights into the Fed’s thinking about monetary policy. But these minutes may already have been overtaken by events: the latest employment and inflation data.

The potentially most important reports, below, are set in bold. The others are unlikely to move markets much unless they contain shockingly good or bad data. All reports relate to January figures unless otherwise stated.

• Tuesday — Producer price index
• Wednesday — Retail sales. Plus import price index, and industrial production and capacity utilization figures. Also, FOMC minutes
• Thursday — Building permits and housing starts. Plus weekly new claims for unemployment insurance to Feb. 12
• Friday — Existing home sales and leading economic indicators

It would take a serious surprise for any of this week’s reports to move mortgage rates far.

Find and lock a low rate (Feb 13th, 2022)

Mortgage interest rates forecast for next week

We’re back in a wait-and-see situation. And what happens to mortgage rates next week may depend almost entirely on Russia’s actions concerning Ukraine. Those rates really could go either way over the next seven days.

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

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, they’re 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) that lenders will quote you. 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