Mortgage rates today, Jul. 20, and rate forecast for next week

Today’s mortgage rates

Average mortgage rates increased moderately yesterday. That ruined the week. Had the sun not risen yesterday (or if markets were closed), we’d have had another seven days in which those rates inched lower. As it is, they’re moderately higher than they were this time last week. Don’t get too depressed yet. They’re still close to six-month lows.

I’m going to skip making a prediction about the direction mortgage rates will take next week. They’ll likely pivot on next Friday’s crucial inflation report, the contents of which are unknown. And, as rumours swirl about President Joe Biden’s possible withdrawal from the presidential race, the Trump trade (more on that below) might strengthen or weaken.

Current mortgage and refinance rates

Should you lock a mortgage rate today?

During the week, I changed my rate lock recommendations. Most remain on lock, but borrowers with more than 60 days before closing might prefer to float.

I’m hoping mortgage rates might be lower by then, assuming the Federal Reserve’s hints of a September cut to general interest rates stay firm. But we’re surrounded by swirling uncertainty and conflicting pressures on those rates. So, my predictions are about as far from certain as they can get.

Still, my personal rate lock recommendations are now:

• LOCK if closing in 7 days
• LOCK if closing in 15 days
• LOCK if closing in 30 days
• LOCK if closing in 45 days
• FLOAT if closing in 60 days

Of course, I’m not suggesting you lock on a day when mortgage rates are falling. There will likely be plenty of days and longer periods when the outlook for those rates is positive. By all means, take advantage of those.

Moreover, 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

What’s going on?

Nothing obvious happened yesterday to push up mortgage rates. So, what’s going on?

Last week, I wrote that mortgage rates have tumbled since Jul. 2 for three main reasons:

1. Federal Reserve Chair Jerome Powell said recent data on inflation and employment might help the Fed cut general interest rates sooner than many feared
2. The June jobs report showed a tightening in the labor market
3. Thursday’s consumer price index (CPI) showed inflation cooling faster than markets expected

And I added, “Those three make up the Holy Grail of lower mortgage rates.”

Nothing’s changed. And yet mortgage rates rose a little last week.

How come? Well, some of it may be down to the so-called Trump trade. The more likely it seems that the former president will win November’s presidential race, the higher mortgage rates tend to move.

That’s because, based on past performance and current rhetoric, a new Trump administration might significantly increase the deficit. That would boost the supply of bonds, diluting the value of existing ones, including mortgage-backed securities (MBSs), the type of bond that largely determines mortgage rates. Lower MBS prices invariably mean higher yields and mortgage rates.

And such an administration will likely introduce new tariffs, which (while great for our industry) tend to increase inflation. And, if inflation rises, the Fed might have to increase general interest rates again.

Politics is way above my pay grade. But I’m bound to report on issues that affect mortgage rates. And, whether or not markets are correct in assessing the effects of former President Donald J. Trump’s policies, they’re currently moving mortgage rates.

The Fed and mortgage rates

The Fed cutting general interest rates may be the key to sustainably lower mortgage rates. But the central bank has made clear that it will act based only on economic data, especially on numbers relating to inflation and employment.

Next Friday, we’re due the Fed’s favorite measure of inflation. And it will land just five days before the central bank is scheduled to announce how its rate policy has been evolving. So, the report could be critical to that Jul. 31 announcement.

Overwhelmingly, investors believe there will be no rate cut that day. Yes, Thursday’s Wall Street Journal (paywall) published a persuasive opinion piece under the headline, “Why the Fed Should Cut Rates Now — Not Wait Until September.” But a Jul. 31 cut still looks highly unlikely.

What markets hope for that day is a signal from the Fed that a September cut is likely. Inevitably, the Fed will dress that up with caveats about how it will depend on subsequent data to make its final decision. But such a signal could be very good for mortgage rates.

Next week’s key inflation report

So, let’s examine more closely next Friday’s report. It’s the personal consumption expenditures (PCE) price index for June.

Like other price indexes, this comprises four main elements. Two cover the month of June. And the other two cover July 1, 2023, to Jun. 30, 2024. Those are the year-over-year (YOY) figures.

Why two numbers for each period? Well, one covers all the items in the survey. And the second, “core” inflation, covers the same but with food and energy prices excluded. Economists and the Fed reckon that removing those, which tend to be volatile, reveals the underlying or core inflation trend.

Low inflation is always good for mortgage rates. So low numbers next Friday would be good.

But markets will already have priced in the figures they’re expecting. So, we’d like numbers that are even smaller than markets expect.

Market expectations for the PCE price index

That means we need to know what markets are expecting. And we can turn to MarketWatch for that. It said, at the time of writing, that expectations are:

• June all-items PCE — 0.1%, up from May’s 0.0%
• YOY all-items PCE — 2.5%, down from May’s 2.6%
• June core PCE — 0.1%, unchanged from May
• YOY core PCE — 2.5%, down from May’s 2.6%

Remember, we want lower-than-expected numbers for mortgage rates to fall. On-forecast ones might leave those rates virtually unchanged. But higher-than-expected ones could be bad for them. And for the prospects of an imminent Fed rate cut.

Other potentially important economic reports next week

Other economic reports next week that could influence mortgage rates are:

• July purchasing managers’ indexes (PMIs) from S&P on Tuesday. There’s one each for the manufacturing and services sector. And markets expect them to weaken slightly
• First reading (of three) of gross domestic product (GDP) during the second quarter of 2024 on Thursday. Markets expect improved economic growth
• July final reading of consumer sentiment. Markets expect that to be unchanged

For each of those, mortgage rates are most likely to fall if the report’s numbers are lower than expected.

Summary of economic reports and events next week

See above for details about the more important economic reports next week. Any abbreviations below are also explained there.

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 — July PMIs from S&P. Plus June existing home sales
• Wednesday — June new home sales
• Thursday — GDP for Q2/24. Plus June data for durable goods orders, trade balance in goods, and retail and wholesale inventories. Also, initial jobless claims for the week ending Jul. 20
• Friday — June PCE price index and associated data. And July’s final reading of consumer sentiment

Friday could be critical for mortgage rates.

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

Mortgage rates forecast for next week

There’s no point in my trying to predict next week’s mortgage rates when a single report could change everything. The PCE price index is just such a report and, given I don’t know what it will say, I’m chickening out of making a prediction.

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.