June 22, 2024
Mortgage

Mortgage Rates Today, Jan. 20, & Rate Forecast For Next Week


Today’s mortgage rates

Average mortgage rates just edged upward yesterday. However, over the last seven days, they’ve risen appreciably. That was mostly down to Wednesday’s retail sales figures, which were much stronger than markets were expecting.

I’m ducking out of giving a prediction for how mortgage rates might move next week. Two economic reports that often move mortgage rates considerably are on the calendar.

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Current mortgage and refinance rates

Program Mortgage Rate APR* Change
Conventional 30-year fixed 7.03% 7.05% +0.03
Conventional 15-year fixed 6.49% 6.51% +0.02
Conventional 20-year fixed 7.06% 7.08% +0.04
Conventional 10-year fixed 6.21% 6.24% +0.07
30-year fixed FHA 6.31% 6.99% +0.08
30-year fixed VA 6.41% 6.52% +0.05
5/1 ARM Conventional 6.38% 7.56% -0.01
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 See our rate assumptions here.

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Should you lock a mortgage rate today?

I’m still hoping and expecting that mortgage rates will slowly glide lower through 2024. The economic omens suggest that’s the most likely scenario.

But there are never guarantees with markets or mortgage rates. And cautious borrowers may prefer to lock their rates sooner than I suggest.

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

Recently

Everything points to the economy experiencing a “soft landing.” One of those happens when inflation falls without being pressured to do so by a recession.

The ideal situation for someone wanting lower mortgage rates would be lower inflation resulting from a recession. Those rates tend to fall most sharply when the economy is struggling and prices are becoming stable.

But a recession tends to hurt many vulnerable people, including by making millions unemployed. Few of us are sociopaths who would wish that on our fellow Americans, especially as slowing price increases alone should be capable of pushing mortgage rates lower.

But the absence of a recession is likely to mean that those rates fall more slowly than otherwise. That’s why I keep talking about mortgage rates gliding gently lower through 2024.

And it’s why we should expect periods of unexpectedly good economic data to push mortgage rates higher. We’re looking at an overall downward trend that will likely be punctuated by times when they rise.

Next week

GDP

Once again, the economic reports most likely to influence mortgage rates are scheduled for the backend of next week.

Thursday brings the first reading (of three) of gross domestic product (GDP) during the last quarter of 2023 (Q4/23). We saw strong growth in GDP of 4.9% during the previous quarter (Q3/23). And markets are expecting a much less impressive 1.7% next week, according to MarketWatch.

That bothers me. Many economic reports have recently been showing remarkable resilience in our economy. For example, employment and retail sales have been strong. And consumer confidence remains buoyant. Yesterday, The Wall Street Journal (paywall) reported, “Consumer sentiment surged 29% since November, the biggest two-month increase since 1991, the University of Michigan said Friday, adding to gauges showing improving moods.”

None of those suggests to me a period of plunging growth. However, investors rely heavily on market forecasts, often trading ahead of a report’s publication, based on what’s expected. And a stronger-than-expected GDP report on Thursday could easily see mortgage rates climb as Wall Street scrambles to adjust expectations to reality. Unless, of course, the forecasts are right and I’m wrong.

Inflation

The other important economic report next week covers inflation during December. It’s the Federal Reserve’s favorite gauge of inflation and is the personal consumption expenditures (PCE) price index.

With inflation reports, we want to see lower-than-expected numbers. But these are hard to predict.

I’ll brief you the morning before each publication for GDP, PCE, and other reports that could next week affect mortgage rates appreciably. There are some such reports on next week’s calendar. But they rarely move those rates far or for long.

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 — Leading economic indicators in December
  • Tuesday — Nothing
  • Wednesday — January purchasing managers’ indexes for the services and manufacturing sectors from S&P.
  • Thursday — Initial reading of GDP in Q4/23. Plus December new home sales and initial jobless claims for the week ending Jan. 20
  • Friday — December PCE price index. Also December pending home sales

Thursday and Friday are the days most likely to see appreciable movements in mortgage rates.

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Mortgage rates forecast for next week

I’m chickening out of providing a forecast for mortgage rates next week. Too much depends on major economic reports over the next seven days.

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.



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