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Today’s mortgage and refinance rates

Average mortgage rates fell just a little last Friday. But last Thursday’s massive jump means they finished that week — and last month — higher than when they started them.

First thing, it was looking as if mortgage rates today might again barely budge. But that could change as the hours pass.

Markets will be closed tomorrow for the Independence Day holiday. And we’ll be back on Wednesday morning. Enjoy your celebrations!

Current mortgage and refinance rates

Should you lock a mortgage rate today?

Recent reporting in the financial media makes me think mortgage rates are unlikely to see any significant and sustained falls until at least the fourth (Oct.-Dec.) quarter of 2023 and probably not until 2024.

And that’s why my personal rate lock recommendations remain:

• LOCK if closing in 7 days
• LOCK if closing in 15 days
• LOCK if closing in 30 days
• LOCK if closing in 45 days
• LOCK 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.

>Related: 7 Tips to get the best refinance rate

Market data affecting today’s mortgage rates

Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data, compared with roughly the same time last Friday, were:

• The yield on 10-year Treasury notes edged down to 3.82% from 3.85%. (Good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
• Major stock indexes were mostly lower. (Good for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
• Oil prices inched up to $70.61 from $70.25 a barrel. (Neutral for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
• Gold prices rose to $1,930 from $1,919 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Gold tends to rise when investors worry about the economy.
• CNN Business Fear & Greed index — climbed to 84 from 80 out of 100. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are often better than higher ones

*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.

Caveats about markets and rates

Before the pandemic and the Federal Reserve’s interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.

So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today might again hold steady or close to steady. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.

Important notes on today’s mortgage rates

Here are some things you need to know:

1. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
2. Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
3. Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
4. When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
5. Refinance rates are typically close to those for purchases.

A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.

What’s driving mortgage rates today?

Currently

To see sustained lower mortgage rates we need to see the inflation rate halving, the economy weakening, and the Federal Reserve stopping hiking general interest rates. And none of those looks likely anytime soon.

Some progress is being made on inflation. But not enough.

And the economy is showing extraordinary resilience. Last week’s gross domestic product (GDP) headline figure was 50% higher than many expected.

Meanwhile, the Fed seems highly likely to hike general interest rates by 25 basis points (0.25%) on Jul. 26. And there may well be at least one more increase after that in 2023.

Recession

As I’ve written before, our best hope for lower mortgage rates is a recession. That should weaken the economy, reduce inflation and perhaps cause the Fed to at least hold general rates steady.

Economists have been predicting an imminent recession for ages. And, not so long ago, I bought that line and was expecting one at any moment.

But, now, many big hitters aren’t expecting a recession until 2024. Yesterday, CNN Business listed a few of those making that prediction:

• Bank of America CEO Brian Moynihan
• Vanguard economists
• JPMorgan Chase economists

Of course, others disagree, as economists always do. Some think a recession will still land later this year. And others believe there will be no recession at all.

This week

There are a few reports this week that could send mortgage rates up or down a bit. But Friday’s jobs report is the one most likely to have a decisive impact.

The consensus among economists is that the report will show 240,000 new jobs created in June compared with 339,000 in May. Anything lower than 240,000 might see mortgage rates tumble, which would be great.

However, we’ve witnessed economists making similar predictions for employment several times over recent months. And, nearly every time, their forecasts have greatly underestimated the resilience of the American labor market and therefore the American economy.

Of course, they might be right this time. Let’s hope so. But I shouldn’t hold my breath if I were you.

Please read the weekend edition of this daily report for more background on what’s happening to mortgage rates.

Recent trends

According to Freddie Mac’s archives, the weekly all-time low for mortgage rates was set on Jan. 7, 2021, when it stood at 2.65% for conventional, 30-year, fixed-rate mortgages.

Freddie’s Jun. 29 report put that same weekly average at 6.71%, up from the previous week’s 6.67%. But Freddie is almost always out of date by the time it announces its weekly figures.

In November, Freddie stopped including discount points in its forecasts. It has also delayed until later in the day the time at which it publishes its Thursday reports. And we now update this section on Fridays.

Expert mortgage rate forecasts

Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

And here are their rate forecasts for the current quarter (Q2/23) and the following three quarters (Q3/23, Q4/23 and Q1/24).

The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were published on May 23 and the MBA’s on Jun. 21.

In the past, we included Freddie Mac’s forecasts. But it seems to have given up on publishing those.

Forecaster	Q2/23	Q3/23	Q4/23	Q1/24
Fannie Mae	6.4%	6.2%	6.0%	5.8%
MBA	6.5%	6.2%	5.8%	5.6%

Of course, given so many unknowables, the whole current crop of forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.

Find your lowest rate today

You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:

“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”

In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?

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 end result is a good snapshot of daily rates and how they change over time.

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How your mortgage interest rate is determined

Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.

Factors that determine your mortgage interest rate include:

• Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
• Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
• Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
• Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
• Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
• Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
• Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
• Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate

Remember, every mortgage lender weighs these factors a little differently.

To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.

Are refinance rates the same as mortgage rates?

Rates for a home purchase and mortgage refinance are often similar.

However, some lenders will charge more for a refinance under certain circumstances.

Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.

This creates a tidal wave of new work for mortgage lenders.

Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.

In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.

Also, cashing out equity can result in a higher rate when refinancing.

Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.

How to get the lowest mortgage or refinance rate

Since rates can vary, always shop around when buying a house or refinancing a mortgage.

Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.

Here are a few tips to keep in mind:

1. Get multiple quotes

Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.

Some simply go with the bank they use for checking and savings since that can seem easiest.

However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.

So get multiple quotes from at least three different lenders to find the right one for you.

2. Compare Loan Estimates

When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.

You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:

• Interest rate
• Annual percentage rate (APR)
• Monthly mortgage payment
• Loan origination fees
• Rate lock fees
• Closing costs

Remember, the lowest interest rate isn’t always the best deal.

Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.

Also pay close attention to your closing costs.

Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.

3. Negotiate your mortgage rate

You can also negotiate your mortgage rate to get a better deal.

Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.

You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.

And if they’re not, keep shopping — there’s a good chance someone will.

Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?

Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).

Fixed-rate mortgages (FRMs) have interest rates that never change, unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.

Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.

With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.

Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.

In most other cases, a fixed-rate mortgage is typically the safer and better choice.

Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.

How your credit score affects your mortgage rate

You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.

This is because credit history determines risk level.

Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.

For the best rate, aim for a credit score of 720 or higher.

Mortgage programs that don’t require a high score include:

• Conventional home loans — minimum 620 credit score
• FHA loans — minimum 500 credit score (with a 10% down
  payment) or 580 (with a 3.5% down payment)
• VA loans — no minimum credit score, but 620 is common
• USDA loans — minimum 640 credit score

Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.

If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.

You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.

How big of a down payment do I need?

Nowadays, mortgage programs don’t require the conventional 20 percent down.

In fact, first-time home buyers put only 6 percent down on average.

Down payment minimums vary depending on the loan program. For example:

• Conventional home loans require a down payment between 3%
  and 5%
• FHA loans require 3.5% down
• VA and USDA loans allow zero down payment
• Jumbo loans typically require at least 5% to 10% down

Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.

If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.

This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.

But a big down payment is not required.

For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.

Choosing the right type of home loan

No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.

The five main types of mortgages include:

Fixed-rate mortgage (FRM)

Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.

The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.

Adjustable-rate mortgage (ARM)

Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.

Your rate and payment can rise or fall annually depending on how the broader interest rate trends.

ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).

For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.

Jumbo mortgage

A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.

In 2023, the conforming loan limit is $726,200 in most areas.

Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.

FHA mortgage

A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.

VA mortgage

A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.

VA loans allow no down payment and have exceptionally low mortgage rates.

USDA mortgage

USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.

Bank statement loan

Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account. This is an option for self-employed or seasonally-employed borrowers.

Portfolio/Non-QM loan

These are mortgages that lenders don’t sell on the secondary mortgage market. This gives lenders the flexibility to set their own guidelines.

Non-QM loans may have lower credit score requirements, or offer low-down-payment options without mortgage insurance.

Choosing the right mortgage lender

The lender or loan program that’s right for one person might not be right for another.

Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.

Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.

Typically, it only takes a few hours to get quotes from multiple lenders — and it could save you thousands in the long run.

Current mortgage rates methodology

We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.

Source: themortgagereports.com