Mortgage and refinance rates today, Feb. 11, and rate forecast for next week

Today’s mortgage and refinance rates

Average mortgage rates rose only modestly yesterday. But there’s no denying they’ve climbed sharply over the last seven days. My hope this time last week that those rates would settle down was only half right. They did a bit. But only after more bad damage was wreaked on Monday.

So, I’m chickening out of making a prediction of where mortgage rates will move next week. That’s partly because markets are still volatile. But it’s also because so much hinges on next Tuesday’s inflation report, the consumer price index.

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.

Naturally, I’m actively reviewing my rate lock recommendations (below). There’s still a good enough chance of mortgage rates settling down and dropping a little over the coming weeks and months for me to leave them as they are for now.

But the risks are obvious. And you should consider locking your rate now if you're cautious over money.

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

Some of what’s happening to mortgage rates now is down to a squabble among economists about the relationship between inflation and employment. In his New York Times e-newsletter yesterday, economist Paul Krugman, a Nobel laureate, gave some details.

He explained that, since 1958, some economists have had an unwavering commitment to the “Phillips curve,” which seems to show a direct relationship between inflation and employment: they rise and fall together.

A decade later, famous economist Milton Friedman and others noticed that things were a bit more complicated than that. They said current inflation is also partly determined by expectations of future inflation. In other words, prices and wages rise when companies and consumers expect prices and wages to rise soon. An augmented Phillips curve was developed to accommodate that.

Dr. Krugman says: “Then came the pandemic and the policy response to it. Suddenly inflation soared to levels not seen since the early 1980s. This shouldn’t have happened according to the standard Phillips curve, but there was a lot of weird stuff going on.”

Even so, many conservative economists decided that the Phillips curve must be rigorously applied on the grounds that only lower employment (higher unemployment) could drive inflation lower. Unfortunately, many of those economists worked for the Federal Reserve.

Dr. Krugman sums up: “For now, my point is that we obviously aren’t rerunning the ’70s. While I’m cautious, on the other hand, about fully embracing the doctrine of immaculate disinflation, inflation does seem to be coming down as quickly and easily as it went up, and without too much economic pain.”

What’s this got to do with mortgage rates?

While the Fed doesn’t directly determine mortgage rates, it certainly influences them enormously. That’s why last Friday’s shockingly good jobs report pushed mortgage rates so unexpectedly high.

Investors knew the Fed was committed to the Phillips curve and that it would likely double down on rate hikes because it believes only higher unemployment will rein in inflation. Sure enough, signals from the central bank since the jobs report suggest that’s what it plans.

True, mortgage rates would likely have moved up a bit on the jobs data even if the Fed had no role at present. They tend to rise when the economy’s showing signs of strength. But a big chunk of markets’ reactions this week is down to the prospect of higher interest rates for longer than previously anticipated.

For how long will the Fed cling to the Phillips curve when inflation’s rise and fall over the last few years had clearly nothing to do with employment? Let’s hope not too long.

Economic reports next week

Next Tuesday morning’s consumer price index (CPI) is likely to be the week’s big economic event. If prices are continuing to fall even while employment continues to rise, the Fed might ease off its more draconian rate hikes. Retail sales might also affect mortgage rates as they reflect the robustness of the economy as well as consumer confidence.

Important reports and events are shown in bold in the following list. And I doubt any others will move mortgage rates far unless they reveal shockingly good or bad data.

• Monday — January inflation expectations from the NY Fed
• Tuesday — January consumer price index. Plus January small business index
• Wednesday — January retail sales. Plus that month’s industrial production and capacity utilization
• Thursday — Initial jobless claims for the week ending Feb. 11. Plus January building permits and housing starts
• Friday — January import price index

Watch out for Tuesday and Wednesday.

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

Mortgage interest rates forecast for next week

There’s no prediction today for mortgage rates over the next seven days. Sorry, but there’s too much volatility at the moment — and too much pivots on Tuesday’s CPI.

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.