Mortgage rates today, Aug. 26, and rate forecast for next week

Today’s mortgage rates

Average mortgage rates barely moved yesterday. And they were only the tiniest bit higher yesterday evening than they were seven days earlier. But that doesn’t fully describe a week that started with jumps and tumbles.

I’m going to duck out of forecasting what will happen to mortgage rates next week. Two (arguably three) hugely important economic reports are on the calendar. And nobody knows what they’ll say. So, mortgage rates next week are unpredictable.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

I doubt we’ll see a sustained, downward trend in mortgage rates for several months.

So, 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.

What’s moving current mortgage rates

I’m devoting most of today’s commentary to the role the Federal Reserve plays in mortgage rates. It doesn’t directly determine them. But it plays an outsize part in influencing the bond market that does largely do so.

That market (in which mortgage-backed securities (MBSs) are traded) works ahead of actual Fed decisions. In effect, MBS investors try to guess what the Fed will do next, among other future events, and then wager that they’re right.

Earlier this year, MBS investors decided that, with inflation falling fast, the Fed would stop hiking general interest rates and begin to cut them much sooner than the Fed itself was suggesting.

Things haven’t worked out that way and, since mid-March, investors have spent a fair amount of time changing their bets. That’s why mortgage rates have been rising, last week to a 22-year high.

Powell’s Jackson Hole speech

That 22-year high was likely in anticipation of a speech made yesterday morning by Fed Chair Jerome Powell. He delivered it at the annual Jackson Hole Economic Symposium.

The New York Times (paywall) reported the speech under the headline, “Fed Chair’s Message Is Clear: The Fight Against Inflation Isn’t Over.” And its story began, “Jerome H. Powell, the chair of the Federal Reserve, pledged during a closely watched speech that his central bank would stick by its push to stamp out high inflation ‘until the job is done’ and said that officials stood ready to raise interest rates further if needed.”

Meanwhile, The Wall Street Journal (paywall) took a slightly less hard line when interpreting the speech, It quoted Mr. Powell thus: “'Given how far we have come, at coming meetings we are in a position to proceed carefully,’ as officials ‘decide whether to tighten further or, instead, to hold the policy rate constant and await further data,’ he said in delicately scripted remarks.”

A surprise

I have to admit that I thought markets would respond more decisively to Mr. Powell’s speech. But, in fact, mortgage rates moved only a little higher.

How come? I guess recent rises in those rates anticipated the hawkish remarks that were actually delivered. So, there was no reason to push mortgage rates significantly higher.

The next meeting of the Fed’s rate-setting body is scheduled for Sep. 19-20. So, expect MBS investors to continue to lay bets on whether a further hike in general interest rates will or won’t be announced on Sept. 20.

Those wagers will change depending on whether economic reports between now and then show inflation and the economy weakening or strengthening. A lower inflation rate and a struggling economy tend to be good for mortgage rates, partly because they make Fed rate hikes less likely.

Next week

Next week is crowded with reports that will reveal how inflation and the economy are doing. Three in particular are important but there are others that could influence mortgage rates.

Those three are:

1. Wednesday’s gross domestic product (GDP) for the second quarter of 2023 — This may turn out to be a damp squib because it’s the second reading of three, and analysts (specialist economists) aren’t expecting it to differ from the first reading
2. Thursday’s personal consumption expenditures (PCE) price index for August — This is the Fed’s favorite gauge of inflation, so it could be crucial. Analysts are expecting the core PCE index to have been unchanged in August compared to July
3. Friday’s jobs report (the “employment situation report”) for August — Each month, the jobs report is often the single most important indicator of the health of the economy. Analysts are expecting modestly fewer jobs to have been created in August than in July, and for average hourly earnings to have risen slightly less quickly

Usually, the difference between analysts’ forecasts and a report’s actual figures drives changes in markets and mortgage rates.

Economic reports next week

I just covered next week’s three most important reports in the previous section. But there’s another that could push mortgage rates higher or pull them lower.

That’s July’s job openings and labor turnover survey (JOLTS) next Tuesday. This shows underlying trends in the labor market, which some see as almost as important as the raw jobs figures.

In the following list of next week’s reports, only those in bold are likely to affect mortgage rates much. The others probably won’t have much impact unless they contain shockingly good or bad data.

• Tuesday — July JOLTS. And August consumer confidence
• Wednesday — Q2 GDP revision
• Thursday — August’s PCE price index Plus new jobless claims for the week ending Aug. 26
• Friday — August jobs report, including nonfarm payrolls (new jobs created that month), unemployment rate, and changes in average hourly wages

Next week is a big one for economic reports — and therefore for mortgage rates.

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

Mortgage rates forecast for next week

Sorry, but I’m chickening out of my usual weekly forecast. So many blockbuster economic reports are on the calendar — all of which could go either way — that I can’t even hazard a guess.

What determines your mortgage interest rate

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.