Today’s mortgage and refinance rates 

Average mortgage rates inched lower yesterday. And they’re now matching their recent all-time low.

There are plenty of reasons (the worsening pandemic, Brexit (more below), the risk of a government shutdown next Friday …) to think mortgage rates will inch yet lower this week. But there are also some factors that could push them higher, including an agreement in Congress over a pandemic stimulus package and the averting of that shutdown.

So there’s zero certainty. But my guess is that mortgage rates will barely move this week as they’re pushed and pulled by events.

Find and lock a low rate (Dec 12th, 2020) Find and lock a low rate (Dec 12th, 2020)

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?

The safe (and arguably smart) move is to lock now. Mortgage rates are at record lows. And you can never be sure that something won’t arise that pushes them higher.

But my view remains that they have further to fall. The pandemic is causing incalculable economic harm. And these rates are almost always low and getting lower when times are hard.

However, if I were waiting to lock, I’d be in two minds about whether to push the button now. After all, the gains from waiting are likely to be small. And the risk of rises never goes away. Only you can make that choice.

Still, for now, my personal recommendations are:

• LOCK if closing in 7 days
• LOCK if closing in 15 days
• FLOAT if closing in 30 days
• FLOAT if closing in 45 days
• FLOAT if closing in 60 days

But 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 still think that the most likely scenario for mortgage rates is that future falls will outweigh future rises. But that can’t be guaranteed.

And there are various risk factors next week that could see them rise, in one case sharply and for a sustained period. Almost as worryingly, we might be set for more volatility in mortgage rates.

Threat 1 — The Federal Reserve

Watch out for next Wednesday afternoon. That’s when the Federal Reserve’s policy body (the Federal Open Market Committee, or FOMC) will announce any policy changes arising from its next two-day virtual meeting on Tuesday and Wednesday morning.

Some fear that it will curb or end its purchases of mortgage-backed securities. And those are the bonds that actually determine mortgage rates.

Personally, I doubt that the Fed will choose to sabotage the housing market, which is one of very few bright spots amid widespread economic gloom. But I might be wrong. And some experts suspect I am.

Threat 2 — Congress

Legislators on Capitol Hill have so far failed to reach an agreement over any package to provide new relief and stimulus to counteract the economic effects of the pandemic. But the pressure on them to do so is growing, as the legislative clock ticks down toward the holidays.

Similarly, those politicians are yet to find a way to avert a government shutdown. If they continue to fail to do so, that shutdown will begin next Friday evening.

Real legislative progress on either of those could put upward pressure on mortgage rates. Though kicking the shutdown can farther down the road probably won’t make much difference.

However, conversely, their continued failure to reach agreements could pull mortgage rates down a little further.

Brexit

Brexit is Britain’s withdrawal from its membership of the European Union. And you may think such a distant event won’t affect the US economy and therefore mortgage rates.

But you’d be wrong. The worst possibility (a no-deal Brexit that would see the UK leave with no trade deal at all in place) would have devastating consequences for Britain and damaging ones for the EU.

And those would have sufficiently large impacts to affect the global and US economies. Sunday evening is the latest (of countless) deadlines on which we supposedly will know what will happen. But, even if that’s extended again, the UK is due to leave regardless on Dec. 31.

Pandemic

However, by far the worst economic influence at the moment (and the reason I remain convinced mortgage rates will keep falling) is the COVID-19 pandemic. And grisly new highs are being reached for infections, hospitalizations and deaths with depressing frequency.

But, besides the personal harms, this is bringing dire economic ones. The entire West Coast and several other states are currently in lockdown. And many others have restrictions. However, even those with few legal restraints have economies that are suffering.

True, we’ll likely see growth in our gross domestic product this quarter. But it won’t be enough to recover much at all from the devastating fall seen earlier in the year. And unemployment numbers are looking grim.

New volatility in mortgage rates?

We might soon see mortgage rates rise and fall much more sharply than in recent months. They’ve tended to just edge up and down for seemingly ages. But that might change.

Why? Well, lenders have been overpricing mortgages in order to dampen down excessive demand: they simply couldn’t cope with the avalanche of applications they’ve been receiving.

And that overpricing has provided them with a cushion that has meant they don’t have to respond as directly to movements in the market for mortgage-backed securities. But that cushion has gotten thin recently.

And we may be heading back to those “exciting” days when mortgage rates moved more sharply.

Economic reports next week

The most important economic report this week comes on Wednesday. And it covers November’s retail sales. The consensus forecast among analysts is for those to shrink by -0.2%. With auto sales excluded, that forecast is +0.1%.

Other important reports this week include:

• Tuesday — November industrial production and capacity utilization
• Thursday — Weekly new claims for unemployment insurance
• Friday — November leading indicators

And don’t forget to look out for that Fed announcement (above) on Wednesday.

Find and lock a low rate (Dec 12th, 2020)

Mortgage interest rates forecast for next week

Things remain highly unpredictable for mortgage rates. And everything depends on what happens in Congress next week. Absent action there, mortgage rates might continue to drift downward.

But, if legislators put in place a good pandemic relief package and avert the looming government shutdown, they may move modestly higher.

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 by 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. Those will be 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