Mortgage Charges Immediately, July 3, & Price Forecast For Subsequent Week
Today’s mortgage and refinancing rates
Average mortgage rates fell yesterday. Because the markets shrugged at the better than expected employment report for that day. More on this below.
I guess again Mortgage rates can barely move this week. There are no headline-grabbing economic reports on the calendar. And right now I don’t see anything obvious that could likely drive them far one way or the other.
Find and lock a cheap rate (July 4th, 2021)
Current mortgage and refinancing rates
|program||Mortgage rates||Effective interest rate*||change|
|Conventionally fixed for 30 years||2,929%||2,929%||-0.01%|
|Conventionally fixed for 15 years||2.25%||2.25%||Unchanged|
|Conventional 20 years old||2.63%||2.63%||-0.12%|
|Conventionally 10 years fixed year||1.95%||1,978%||-0.01%|
|30 years permanent FHA||2,695%||3,351%||-0.02%|
|15 years fixed FTA||2,369%||2,968%||-0.19%|
|5/1 ARM FHA||2.5%||3.213%||Unchanged|
|30 years of permanent VA||2,343%||2,515%||-0.03%|
|15 years fixed VA||2.25%||2,571%||Unchanged|
|Prices are provided by our partner network and may not reflect the market. Your rate can be different. Click here for an individual price offer. View our rate assumptions here.|
Find and lock a cheap rate (July 4th, 2021)
COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To learn how the coronavirus could affect your home loan, click here.
Should You Lock A Mortgage Rate Today?
Last week was a good week for mortgage rates. However, according to data from Mortgage News Daily, they fell just 4 basis points in five business days. And a basis point is only one hundredth of 1%. There is no risk that those who are still fluctuating their interest rates will get fat from the lower monthly payments or closing costs that these types of falls bring with them.
However, they run the risk of being caught in a sudden surge in mortgage rates, which is entirely possible. Even without this sharp increase, Fannie Mae expects an average interest rate of 3.2% for a 30-year fixed-rate mortgage in the first quarter of 2022. Freddie Mac expects 3.5%. And the Mortgage Bankers Association is reckoning with 3.7%. Whoever you believe, most experts assume that mortgage rates will go up.
And in my opinion, the risks of floating outweigh the potential gains. My personal recommendations therefore remain:
- LOCK when close in 7th Days
- LOCK when close in fifteen Days
- LOCK when close in 30th Days
- LOCK when close in 45 Days
- LOCK when close in 60 Days
With so much uncertainty right now, however, your instincts could turn out to be as good as mine – or better. So let yourself be guided by your gut instinct and your personal willingness to take risks.
What is moving the current mortgage rates
There was a good article in the New York Times yesterday by Julia Coronado, who used to be an economist with the Federal Reserve Board of Governors and is now a professor at the University of Texas at Austin. It explored the new kind of economic recovery we are now experiencing, based on more generous support for individual Americans and businesses. And she paid tribute to both the Trump and Biden administrations for adopting such a policy.
Incidentally, she also explained why yesterday’s excellent employment report did not ignite any fireworks in the markets:
The more conventional monetary policy advisors who are very vocal about inflation worries on television may be right that we will see more sustained inflationary pressures, but markets broadly agree with the Fed’s view that the heat of this moment is as will prove largely temporary. Interest rates are still low and the US’s creditworthiness is hardly in doubt.
– NYT, “Here’s Why This Economic Recovery Shams 2009” (Paywall), July 2, 2021
In other words, enough investors are content to quit the Fed for now. And they believe the central bank will enforce its current policy.
Not from the forest
That has been the case for months in the bond market in general – and in particular for those who determine mortgage rates. As a result, there was only occasional and limited volatility in these prices.
But institution-based trading is inherently fragile. And it might take something very small to completely change the mood: a straw that breaks the camel’s back.
To mix up metaphors, what would happen if the little Dutchman took his finger off the Fed’s levee? We can’t be sure. But we could see the Fed being forced to slow and then stop buying assets that are currently keeping mortgage rates artificially low.
As long as investors maintain their confidence in the Fed, however, mortgage rates are likely to drift. A few weeks will be fine. Most experts, however, expect the overall direction of travel to be (gently) higher.
It was possible that yesterday’s job report might have led the Dutch kid to retrieve his digit. And future employment and inflation reports still have the potential to do so.
But that only applies as long as the economic recovery continues. At the moment it looks safe. And the Fed is forecasting 7% growth in 2021, the highest rate since the early 1980s.
However, the future is never certain. And something could come that strangles that recovery. For example, some fear the possible appearance of a vaccine-resistant variant of SARS-CoV-2, the virus that causes COVID-19. If this or any other earth-shattering event occurs, mortgage rates could well fall.
But when deciding when to unlock or lock your mortgage rate, you need to weigh the probabilities. And it seems unwise to me to base the size of your future monthly payments on such unlikely scenarios.
Economic reports next week
The event on next week’s calendar that is most likely to affect mortgage rates is not an economic report at all. It is the release of the minutes of the last meeting of the Federal Reserve’s Open Market Committee (FOMC) on Wednesday. This is the main political body in the Federal Reserve.
Investors and analysts are always brooding over these minutes. But you will be particularly interested in these latest as they will expose discussions about future rate hikes and reducing bond purchases. They are recording the temperature of individual top Fed officials on this crucial issue.
None of the actual economic reports listed below are likely to cause much movement in the markets unless they include shockingly good or bad data. Additionally, regular readers know that investors have ignored most of the economic reports in the past few months. Therefore, the effects of the following may differ from the usual ones:
- Tuesday – June Service Index of the Institute for Supply Management (ISM)
- Wednesday – FOMC Minutes and June Vacancies
- Thursday – Weekly new applications for unemployment insurance until July 10th
Next week, Wednesday is the big day with its FOMC protocol.
Find and lock a cheap rate (July 4th, 2021)
Mortgage rates forecast for next week
I expect that again Mortgage rates can stay stable or near stable next week.
Mortgage and refinancing rates usually move in parallel. Note, however, that the refinancing rates are currently slightly higher than those for buying mortgages. This gap will likely stay pretty constant as it changes.
Meanwhile, a recent regulatory change has made most investment property and vacation home mortgages more expensive.
This is how your mortgage rate is determined
Mortgage and refinance rates are generally determined by prices on a secondary market (similar to the stock or bond markets) that trade mortgage-backed securities.
And that depends heavily on the economy. So mortgage rates are typically high when things are going well and low when the economy is in trouble.
But you play huge roles in determining your own mortgage rate in five ways. You can significantly influence it by:
- Find your best mortgage rate – they vary widely from lender to lender
- Boost Your Credit Score – Even a small increase can make a big difference to your rate and payments
- Save the Biggest Down Payment possible – lenders like you to have real skin in this game
- Keep Your Other Borrowings Modest – The lower your other monthly obligations, the higher the mortgage you can afford
- Choose Your Mortgage Carefully – Are You Better Off With a Conventional, FHA, VA, USDA, Jumbo, or Other Loan?
The time you spend getting these ducks in a row can result in you winning lower prizes.
Remember, it’s not just a mortgage rate
Make sure to count all of the upcoming home costs when figuring out how much a mortgage you can afford. So concentrate on your “PITI” This is yours P.rincipal (pays back the amount borrowed), IInterest (the price of borrowing), (property) TAxles and (homeowners) IInsurance. Our mortgage calculator will help you with this.
Depending on your type of mortgage and the amount of your down payment, you may also need to pay for mortgage insurance. And that can easily reach three digits every month.
But there are other potential costs as well. So you have to pay community contributions if you choose to live with an HOA. And wherever you live, you have to expect repair and maintenance costs. There is no landlord to call if something goes wrong!
Eventually, you will find it hard to forget about closing costs. You can see this in the specified annual percentage rate (APR). Because this effectively spreads it out over the life of your loan and makes it higher than your pure mortgage rate.
However, you may be able to get help with these closing costs and your down payment, especially if you are a first-time buyer. Read:
Down payment assistance programs in each state for 2021
Mortgage rate methodology
The mortgage report receives interest rates from several credit partners on a daily basis according to selected criteria. We’ll find an average interest rate and an APR for each type of loan shown on our chart. By averaging a number of rates, this will give you a better idea of what you might find in the market. In addition, we determine average interest rates for the same types of credit. For example FHA fixed with FHA fixed. The end result is a good snapshot of the daily rates and how they change over time.