Mortgage and refinance rates today, Feb. 25, and rate forecast for next week

Today’s mortgage and refinance rates

Average mortgage rates moved moderately higher yesterday. And that canceled out Thursday’s fall. Absent a miracle early next week, February looks set to be what experts call a “dumpster-fire month” for these rates.

At some time, mortgage rates will settle down and become less volatile. However, I doubt there will be worthwhile or sustained falls anytime soon. That calming may happen next week but my gut says there’s more likely to be a modest or moderate rise over that period.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

The mood in markets — including the one that determines mortgage rates — turned 180º during February. And it might take some seriously rate-friendly economic data or news to switch it back. Unfortunately, the chances appear low of such information emerging, which is why I’m recommending you lock your rate as soon as possible.

Of course, mortgage rates will still fall on some days and perhaps for longer periods. But I doubt that those falls will outweigh the rises surrounding them for at least several weeks — and maybe several months.

Anyway, new personal rate lock recommendations are:

• 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.

What’s moving current mortgage rates

Let’s get back to basics. The Federal Reserve is desperate to see signs that its inflation-taming strategy is working. But recent economic data aren’t providing such signs. Just yesterday, a crucial report showed price-rise rates bouncing higher in January following a low December.

Markets are as desperate as the Fed to see low inflation because that will allow the central bank to begin cutting interest rates, ushering in a new era of cheap borrowing. And it’s easy to make money in such an environment.

So, both the Fed and markets want similar things. But they go about getting them very differently.

Fed vs. markets

The Fed carries the can if inflation doesn’t fall back to 2% fairly soon. So it’s highly cautious.

But Wall Street loves speculating. So, for three months, it lay bets that the Fed was being too gloomy, that inflation would tumble quickly, and that interest rates might begin falling again sometime in the middle of 2023.

The Fed influences mortgage rates but it’s markets that determine them. And it’s Wall Street’s over-optimistic wagers on interest rates falling soon that explains why mortgage rates tumbled from mid-October last year through January 2023. And why, when optimism hit reality, they’ve risen sharply this month.

Markets sabotaged themselves

What the Fed wants is a subdued economy to reduce demand and therefore curb price rises. And markets’ wild optimism over three months had the opposite effect. Booming stock markets (and lower mortgage rates) make people feel richer, which actually boosts demand and so pushes prices higher more quickly.

So, you might argue that Wall Street sabotaged its own interests. In any event, mortgage rates are now close to the highs seen in mid-October 2022. And the Fed’s message concerning future rates is currently “higher and for longer” than previously thought.

Unfortunately, that’s likely to be the reality for mortgage rates for a while. Monthly economic reports for January, published in February, show the Fed’s strategy failing badly. Instead of the economy tightening, we saw an exceptional number of new jobs added, high retail sales, and the inflation rate bouncing higher.

So, the Fed has to double down on its strategy. It has little choice because it has no other levers it can pull to damp down inflation (except one less powerful one that would be even worse news for mortgage rates).

What’s coming up for mortgage rates?

All this has created a pretty dire situation for mortgage rates as they head back to highs last seen around the Great Recession. And it’s one that I’m guessing will last at least several months.

Might there be bright spots during that time? Well, of course, there will be days and longer periods when these rates fall. They’re a natural part of any market.

But the only hope I can see of sustained falls is if Wall Street sees a few better economic reports and repeats its recent folly of wagering on lower rates coming sooner than is realistic. Might investors be that dumb? I wouldn’t bet against it.

Economic reports next week

There are plenty of economic reports on next week’s calendar. But none of them typically moves mortgage rates far or for long. Indeed, the next seriously important one is Mar. 10’s jobs report.

That doesn’t necessarily mean this will be a quiet week for mortgage rates. Top Fed officials have speaking engagements every day next week. And markets are finally paying attention to them.

Important reports and events are shown in bold in the following list. (Spoiler alert: None this week.) And I doubt others will move mortgage rates far unless they reveal shockingly good or bad data.

• Monday — January pending home sales. Plus durable goods orders and core orders for that same month
• Tuesday — February consumer confidence index. Plus January S&P Cash Shiller home price index
• Wednesday — February Institute for Supply Management (ISM) index for the manufacturing sector
• Thursday — Initial jobless claims for the week ending Feb. 25
• Friday — February ISM index for the services sector

Watch out for those Fed speakers!

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

Mortgage interest rates forecast for next week

If you’ve read much of the above, you’ll know how gloomy my outlook for mortgage rates currently is.

Still, there will be occasional periods when they fall, and I can’t rule out one of those occurring next week. All I can say is that I reckon these rates are more likely to rise a bit over the next seven days or at best hold steady.

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 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.