Mortgage Rates Today, Dec. 30, & Rate Forecast For Next Week

Today’s mortgage rates

Average mortgage rates rose modestly yesterday. But they’d fallen earlier in the week. And they closed yesterday lower by only the smallest measurable amount than they were seven days earlier. So, my prediction last week that they’d barely move turned out to be correct.

I wish my forecasting task were as easy today. I’m going to say that mortgage rates might fall gently next week. But I don’t have much confidence in the prediction. It relies on the week’s economic reports (including Friday’s hugely influential jobs report) delivering the data markets want to hear.

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Current mortgage and refinance rates

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Should you lock a mortgage rate today?

Whatever happens next week, I continue to be optimistic about future mortgage rates. I hope that they are now on a gentle downward trend that could last for much of 2024.

However, yesterday, I reminded you of my favorite quote. The late Harvard economist John Kenneth Galbraith once wrote, “The only function of economic forecasting is to make astrology look respectable.”

So, there are no guarantees. All I can do is look at current trends and hope (with good grounds) that they continue.

Still, my personal rate lock recommendations are:

• LOCK if closing in 7 days
• FLOAT if closing in 15 days
• FLOAT 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 let your gut and your own tolerance for risk help guide you.

What’s moving current mortgage rates

2023

This year started out with everyone gloomy about the economy’s prospects. As this morning’s Wall Street Journal (paywall) put it: “A year ago, everyone from the strategists at Wall Street banks to rap artist Cardi B was calling for a recession. Instead, inflation continued falling, consumers kept spending and the unemployment rate fell to 3.4%, the lowest level since 1969.”

Even during the latter part of the year, consumers tended to tell surveys that they were pessimistic about the economy. But they said they were optimistic about their personal finances. That’s often a sign that an incorrect negative narrative promoted by news outlets has taken hold. Luckily, Americans didn’t believe it enough to stop spending.

2024

The New York Times’s DealBook e-newsletter yesterday laid out markets’ mood entering 2024: “Analysts see lower borrowing costs, a soft landing (that is, an economic slowdown that avoids a recession) and a pretty good year for investors.”

Such a mood would often be bad for mortgage rates. They tend to fall when the economy’s struggling and rise when it’s thriving. And that mood may yet apply a brake on those rates falling as quickly as otherwise.

But I still expect them to slowly fall. Why? Because inflation is falling much more quickly than most economists expected. And that should allow the Federal Reserve to soon begin cutting general interest rates. Inflation and higher Fed rates have been the main drivers behind the rapidly rising mortgage rates we’ve seen since October 2021.

Just don’t assume anything is written in stone. The Times’s e-newsletter I quoted earlier included a warning about chicken counting: “But if 2023 taught the market pros anything, it’s that forecasts can look out of date pretty fast. A slew of things could disrupt the markets in the year ahead — inflation creeping up again, or not, is one big factor to watch. And there are wild cards, too, with voters expected to head to the polls in over 50 countries next year, including the U.S.”

Next week

Markets will be closed on Monday for the New Year’s Day holiday. But next week is pretty packed with economic reports after that, many of which could affect mortgage rates.

Remember, investors often trade ahead of a report’s publication based on the “analysts’ consensus forecast.” Leading economists with expertise in the area of a report are polled about their expectations and a consensus figure is determined. Typically, the gap between the actual number in the report and the one that was forecast moves markets and mortgage rates further than the report itself.

With almost all economic reports, mortgage rates tend to fall when the report’s figures are worse than the analysts’ consensus forecast, which I call market expectations. So, fingers crossed that next week brings some disappointing data.

Employment

The blockbuster report next week is Friday’s jobs report for December. Its formal name is the employment situation report.

Analysts (and therefore markets) are expecting this to show that the number of new jobs created that month fell to 170,000 from 199,000 in November. And they anticipate that the unemployment rate will tick up to 3.8% from 3.7%, while average hourly wages grow more slowly: by 0.3% that month rather than November’s 0.4%.

There are a couple of other employment reports next week. While they’re much less influential than the official jobs report, they can still affect mortgage rates. So, watch out for November’s job openings and labor turnover survey (JOLTS) next Wednesday. And for December’s ADP employment report, which covers only private-sector employment, on Thursday.

As always, I’ll brief you more fully on each of next week’s economic reports on the day before it’s published.

Also next week …

We have four purchasing managers’ indexes (PMIs) on next week’s calendar, two each from different sources for the services and manufacturing sectors. Those sources are S&P and the Institute for Supply Management (ISM). The impact of these on mortgage rates tends to be minor and temporary but there are occasional exceptions.

Normally, I’d warn you about Wednesday’s release by the Fed of the minutes of the last meeting of its rate-setting committee. This can sometimes be highly influential. However, I suspect markets already have a very good idea of what was said at its December meeting and I’d be surprised if these minutes caused waves.

Economic reports next week

See above for details about the more important economic reports next week.

In the following list of next week’s reports, only those in bold typically have the potential to affect mortgage rates appreciably. The others probably won’t have much impact unless they contain shockingly good or bad data.

• Monday — Markets closed
• Tuesday — December PMI for the manufacturing sector from S&P. And November construction spending
• Wednesday — November JOLTS. And minutes of the December Fed meeting. Plus December PMI for the manufacturing sector from the ISM
• Thursday — December ADP employment report. And December PMI for the services sector from S&P. Plus initial claims for jobless benefits for the week ending Dec. 30
• Friday — December jobs report. And December PMI for the services sector from the ISM. Plus factory orders in November

Friday’s jobs report is by far the most important of next week’s publications.

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Mortgage rates forecast for next week

Mortgage rates next week might fall a little. But that depends on the data next week’s economic reports deliver.

In any event, we at The Mortgage Reports wish you and your loved ones a happy, prosperous and healthy New Year.

How your mortgage interest rate is determined

A bond market generally determines mortgage and refinance rates. It’s the one where trading in mortgage-backed securities takes place.

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.

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, conforming, 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 something called you “PITI.” That stands for:

• Principal — Pays down the amount you borrowed
• Interest — The price of borrowing
• Taxes — Specifically property taxes
• Insurance — Specifically 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 rate 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:

Down payment assistance programs in every state for 2023

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The result is a good snapshot of daily rates and how they change over time.