Mortgage and refinance rates today, Feb. 4, and rate forecast for next week

Today’s mortgage and refinance rates

Overall, average mortgage rates have barely moved over the last seven days, just inching down by the smallest measurable amount. But that fact disguises some wild swings — both up and down.

Volatility returned to mortgage rates this week. (Read on for the details.) But the large movements were triggered by important economic events, and there aren’t any of those scheduled for next week. So, I’m hoping things will settle down and that we’ll see relatively steady mortgage rates. Let’s hope so.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

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.

Friday’s jobs report really soured markets’ happy mood. And we’ll have to see how long it takes for mortgage rates to recover from that publication. I’m still relatively optimistic that those rates will hold steady or fall over the coming month or two and probably longer. But the risk of rises is greater now than it was last week.

Anyway, my personal rate lock recommendations are:

• LOCK if closing in 7 days
• LOCK 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.

Why are the first two recommendations still to lock? Because there’s too much risk of volatility to take chances so near to closing. Of course, if you’re happy with that risk, float away.

What’s moving current mortgage rates

The Federal Reserve has a plan to rein in inflation. It hikes interest rates. That means higher borrowing costs for consumers and businesses, which should reduce demand for goods and services. And lower demand drives prices lower.

Sure enough, price rises have been moderating very satisfactorily. But the Fed reckons they won’t get back to normal until unemployment rises.

And Friday’s jobs report showed the opposite happening. The number of new jobs created in January shot up while the unemployment rate fell. And that’s a problem, as yesterday’s Wall Street Journal (paywall) explained:

“Bond investors and economists have anticipated that more evidence of a slowdown in investment, spending and hiring could persuade the Fed to stop lifting rates after making another increase at its March 21-22 meeting. But signs of any reacceleration could prompt officials to delay decisions about a pause into the summer.”

And that’s the problem for mortgage rates — and the reason they climbed steeply yesterday. Markets were counting on the Fed to pause its rate hikes early. And Friday’s employment data make that less likely.

A short-term or medium-term problem?

Will the effects of Friday’s jobs report last days, weeks or months? Much will depend on other economic reports between now and the Fed’s next opportunity to hike rates on Mar. 22.

If inflation reports over the next six or seven weeks continue to show price rises slowing, markets could regain their optimism quickly. And if February’s jobs report (due Mar. 3) suggests yesterday’s data were outliers, investors could turn euphoric.

Personally, I think it reasonable to hope that inflation figures will continue to be good. But, after yesterday’s shock, I’m unsure about where employment numbers will go next.

So, overall, I’m optimistic that mortgage rates won’t move too far in the near future. However, although I have grounds for that optimism, they are a long way from the sort of level of confidence that makes me comfortable.

Economic reports next week

Next week is a very quiet one for economic reports. So, I’m hoping for a quiet seven days for mortgage rates. We’ll see.

Important reports and events are shown in bold in the following list. (Spoiler alert: there aren’t any this week.) And I doubt any others will move mortgage rates far unless they reveal shockingly good or bad data.

• Tuesday — January New York Fed inflation expectations for 1 year and 5 years
• Thursday — Initial jobless claims for the week ending Feb. 4
• Friday — February consumer sentiment index and inflation expectations indexes from UMich

Let’s hope mortgage rates take a breather.

Time to make a move? Let us find the right mortgage for you

Mortgage interest rates forecast for next week

With luck, mortgage rates will barely change over the next week. But we might yet see delayed reactions to Friday’s jobs report. And they could push those rates either way.

How your mortgage interest rate is determined

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.

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 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:

Down payment assistance programs in every state for 2021

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.