Average mortgage rates barely moved yesterday, just inching higher. On Thursday, Freddie Mac published its weekly average for conventional 30-year, fixed-rate mortgages. It was 6.33% down from 6.48% a week earlier.
Some think we're entering a phase within which we will see mortgage rates move within a tighter band. But there are plenty of economic events that could change that, including another crucial inflation report on Jan. 27 and a Federal Reserve rate change on Feb. 1. So, nothing is very predictable.
|Conventional 30 year fixed||6.277%||6.311%||+0.06%|
|Conventional 15 year fixed||5.639%||5.695%||-0.04%|
|Conventional 20 year fixed||5.976%||6.032%||+0.09%|
|Conventional 10 year fixed||5.38%||5.498%||-0.16%|
|30 year fixed FHA||5.998%||6.734%||-0.43%|
|15 year fixed FHA||5.418%||5.904%||+0.03%|
|30 year fixed VA||5.651%||5.877%||-0.77%|
|15 year fixed VA||5.947%||6.303%||+0.01%|
|Conventional 5 year ARM||6.516%||6.834%||+0.06%|
|5/1 ARM FHA||6.516%||7.09%||+0.06%|
|5/1 ARM VA||6.516%||7.09%||+0.06%|
|Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.|
Don't lock on a day when mortgage rates look set to fall. My recommendations (below) are intended to give longer-term suggestions about the overall direction of those rates. So, they don't change daily to reflect fleeting sentiments in volatile markets.
After a period of falling mortgage rates, I'm clearly considering changing my personal rate lock recommendations (below). But, first I wish to see how the Fed responds to Thursday's inflation report.
So, for now, those recommendations remain:
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 own tolerance for risk help guide you.
As economist Paul Krugman wrote yesterday for the New York Times, "Thursday's report on consumer prices was really good news. I mean, really, really good news."
Pretty much everyone will be delighted, including the Federal Reserve. But, for the Fed its joy will be tempered by some dread.
For months now, the central bank has struggled to persuade markets that they should not expect a return to low interest rates anytime soon. But investors seem to think the Fed's kidding.
And now there is a significant gap between the bank's and investors' expectations for future interest rates. Personally, I think the Fed will win this battle of expectations. Its institutional memory is still scarred by its experiences in the early 1980s.
Back then, inflation had been chronic and high — much more so than we've seen recently. And the Fed's rate hikes to rein in that inflation were sharp and sustained. And they led to a very painful recession. No wonder the bank stopped its rate increases as soon as it could.
But it stopped them too soon. Inflation was playing possum and quickly rose again. And the Fed had to start hiking rates again, triggering another recession.
That was 40 years ago and many investors seem to have forgotten the lesson. But the Fed certainly hasn't.
This looks to me as if we are due a crunch: when investors' sunny optimism crashes into the Fed's steely determination. If I'm right, we might see mortgage rates rise sharply when that crunch comes.
I don't know when that will be. However, it could be as soon as Feb. 1. That's when the central bank is due to unveil its next rate hike.
By far the most important economic report due next week concerns retail sales for December. That will show how the economy is holding up after a year of rising interest rates.
Important reports and events are shown in bold in the following list. And I doubt any others will move mortgage rates far unless they reveal shockingly good or bad data.
Some senior Fed officials will be making speeches or media appearances next week. Markets may be especially sensitive to their remarks.
With luck, mortgage rates might be due a quiet seven days. However, much depends on markets' reactions to Fed comments.
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. But inflation rates can undermine those tendencies.
But you play a big part in determining your own mortgage rate in five ways. And you can affect it significantly by:
Time spent getting these ducks in a row can see you winning lower rates.
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 and your down payment, especially if you're a first-time buyer. Read: