Mortgage rates today, Jan. 27, and rate forecast for next week

Today’s mortgage rates

Average mortgage rates effectively held steady yesterday. And they inched just a little lower over the last seven days. Let’s not start popping Champagne corks but that’s a good sign.

I'm hoping that mortgage rates might fall again next week. But that depends on two things. First, the Federal Reserve needs to be upbeat on Wednesday about the prospect of falling general interest rates this year. And, secondly, Friday’s jobs report must not exceed expectations too much.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

I mistakenly thought we’d be seeing the start of mortgage rates’ gentle glide lower by now. But unexpectedly strong economic data have delayed their descent. So, I adjusted my rate lock recommendations during the week to reflect that.

Financially adventurous readers might prefer to wait until the last minute to lock their rate. And cautious ones may wish to do so now.

Really, there’s no way of telling when sustained falls might begin, assuming they arrive at all. I think they will but nobody can be certain.

Still, my personal rate lock recommendations are:

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

What’s moving current mortgage rates

Recently

There was good news for mortgage rates in yesterday’s inflation report, which was the personal consumption expenditures (PCE) price index for December. How come? I’ll let The Wall Street Journal (paywall) explain:

“Core prices, which exclude volatile food and energy costs, rose 2.9% on the year, the smallest year-over-year increase since March 2021. Using three- and six-month annualized rates, core inflation was 1.5% and 1.9%, respectively, in December.

"“It really is amazing that these three- and six-month inflation rates are below 2%,” said Charles Evans, who was president of the Chicago Fed from 2007 until early 2023. “Six months is a pretty good amount of time” to provide confidence that inflation has sustainably returned to the lower rates seen before the pandemic, he said.”

What’s so great about that? Well, the Fed only began hiking general interest rates because inflation had zoomed far beyond its target of 2% annually. But the inflation measure that the Fed cares about most has been back below 2% over the last six months. And that gives the central bank a good reason to begin cutting general interest rates, which pretty much invariably leads to lower mortgage rates.

The Fed next week

The Fed begins a two-day meeting of its rate-setting committee next Tuesday and will make an interest-rate announcement on Wednesday. Don’t get too excited!

It’s very unlikely to unveil any cuts that day. The CME FedWatch tool puts the likelihood of such a cut at 3.1% with a 96.9% probability of rates staying unchanged.

However, the Fed has scheduled a news conference that day as well as a written statement. And what those contain could have significant consequences for mortgage rates that day and for weeks to come.

For lower mortgage rates, we’d like the Fed to talk up the chances of an early (preferably March 20 or May 1) rate cut with at least three 2024 ones in prospect.

Employment next week

Next week’s most important economic report lands on Friday and is the jobs report for January. It rivals the consumer price index (CPI) as the most consequential of all monthly reports for markets generally and mortgage rates in particular.

Ideally, we want the jobs report (formally the employment situation report) to show fewer new jobs being created in January (below 180,000), along with a tiny rise in the unemployment rate and a slight slowing in the increase in hourly wages. That’s what markets are expecting and lower mortgage rates typically come along after labor figures are worse than expected.

Other reports next week

You’ll see a number of employment-related and other reports listed below. Any of them could move mortgage rates but they tend to do so modestly and temporarily.

PMIs are purchasing managers’ indexes, which are surveys of the volume of goods and services being purchased by organizations.

Economic reports next week

See above for details about the more important economic reports next week.

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

• Monday — Nothing
• Tuesday — December job openings and labor turnover survey (JOLTS); January consumer confidence; November S&P Case-Shiller home price index
• Wednesday — Fed interest rate decision. January ADP employment report. Plus employment cost index for the fourth quarter of 2023 (Q4/23)
• Thursday — Productivity in Q4/23. Plus January PMIs for the manufacturing sector. And initial jobless claims for the week ending Jan. 27
• Friday — January jobs report. Also consumer sentiment for the same month. And December’s factory orders

Wednesday and Friday could prove critical.

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

Mortgage rates forecast for next week

I think there’s a good chance that mortgage rates could fall next week. But that entirely depends on welcome news from both the Fed and the jobs report.

How your mortgage interest rate is determined

A bond market generally determines mortgage and refinance rates. It’s the one where trading in mortgage-backed securities takes place.

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 something called you “PITI.” That stands for:

• Principal — Pays down the amount you borrowed
• Interest — The price of borrowing
• Taxes — Specifically property taxes
• Insurance — Specifically 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.