Mortgage and refinance rates today, March 12, and rate forecast for next week

Today’s mortgage and refinance rates

Average mortgage rates just inched higher yesterday. But that doesn’t reflect the whole week. That was bad for those rates, pushing them to their highest levels in nearly three years.

Once again, I’m predicting that mortgage rates might rise next week. But we’re in volatile times and every prediction’s recipe contains cupfuls of speculation.

Current mortgage and refinance rates

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Should you lock a mortgage rate today?

I’d lock my rate on the first morning when mortgage rates look likely to rise. Recently, that’s been most mornings.

Of course, you risk missing out on future falls. But I’m expecting a lot more rises than falls. And carrying on floating your rate over several days or weeks is, I believe, highly risky.

Yes, events could prove me wrong. It wouldn’t be the first time. But I doubt they will this time.

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 personal tolerance for risk help guide you.

What’s moving current mortgage rates

Federal Reserve

The Federal Reserve’s Federal Open Market Committee (FOMC) begins a two–day meeting next Tuesday. And it will release a report at 2 p.m. (ET) the following day (March 16), with a news conference scheduled for 30 minutes later.

This is potentially highly important. The FOMC is the Fed’s monetary policy committee and holds enormous sway over the whole economy, including mortgage rates. And its focus at the moment is how it can reduce inflation.

We know the opinions of Fed Chair Jerome Powell on March 2 and 3 because he provided testimony to House and Senate committees on those days. Next Wednesday’s report and news conference will tell us whether events in Ukraine and his colleagues at the meeting have managed to change his mind.

What Powell predicted

When he testified on Capitol Hill, Mr. Powell made comments in two areas that are especially relevant to both inflation and mortgage rates. He expected that:

1. The federal funds rate will rise 0.25% next Wednesday – That will push up rates on pretty much all variable–rate borrowing. But we’ve been expecting this since January
2. The FOMC would not next week publish plans to sell its vast stock of bonds. But it was working on those plans and Mr. Powell would unveil them soon

Mortgage rates aren’t directly affected by changes in the federal funds rate. But rises and falls in that rate do tend to influence them in the long run.

However, mortgage rates will almost certainly be directly affected by the Fed’s plans to sell its stock of mortgage–backed securities (MBSs). Those are the type of bond that largely determines those rates. And the Fed owned $2.69 trillion worth of them as of Wednesday.

Mortgage bonds

These mortgage bonds are like any other bond. The less you pay for the same fixed income, the higher your yield is. That’s a mathematical inevitability. And it’s MBS yields that are directly connected to mortgage rates.

So, when the Fed starts to offload its mortgage bonds, both yields and mortgage rates will rise. Because all that extra supply will push prices down and yields up. That’s just supply and demand in action.

Of course, if the Fed were to dump its entire $2.69 trillion of MBSs in one go, mortgage rates would shoot through the roof and into orbit. But it won’t do that because it’s not dumb. Instead, it will sell them as quickly as markets can absorb them without destabilizing.

What to look out for next Wednesday

Of course, the Fed’s been signaling all this for months. And markets already know the stuff I laid out above.

That’s why mortgage rates have been rising for much of this year and why investors have already baked current expectations into MBS prices. Indeed, the pain to come might turn out to be mild compared to what we’ve already endured.

But next Wednesday might provide more information that could send those rates higher or (probably briefly) lower. Even if there are no new announcements since Mr. Powell’s recent testimony, markets will be looking out for changes in tone and emphasis. And they’ll want to hear whether the Fed:

• Sounds more aggressive (“hawkish”) or less (“dovish”) when it talks about its anti–inflationary measures, including rate hikes and bond sales
• Appears spooked by the war in Ukraine and in what way. If it fears Russian aggression will tip the world into a global recession, it may be more dovish. But if it fears more the extra inflation the conflict is creating, it could be more hawkish

How the Fed “sounds” and “appears” may come across as barely noteworthy to you and me. But, believe me, investors will be analyzing in great detail every word written and spoken by Mr. Powell and his colleagues on Wednesday afternoon.

Economic reports next week

There are some important economic reports on next week’s calendar. Wednesday sees the publication of retail sales figures for February. And Tuesday and Wednesday bring some future inflation indicators with the producer price index and the import price index.

But Wednesday’s FOMC report and news conference (see above) are likely to dominate the week.

The potentially most important reports, below, are set in bold. The others are unlikely to move markets much unless they contain shockingly good or bad data.

• Tuesday – February producer price index
• Wednesday – FOMC events. Plus retail sales and import price index, both for February
• Thursday – February housing starts and building permits. Plus weekly new claims for unemployment insurance to March 12
• Friday – February existing home sales

Wednesday’s the day to look out for.

Mortgage interest rates forecast for next week

I suspect that mortgage rates might move higher next week. But much depends on that FOMC meeting on Wednesday. If it’s dovish, we could see some falls, though I doubt they’ll last long. If it’s hawkish, expect more rises.

Mortgage and refinance rates usually move in tandem. And the scrapping of the adverse market refinance fee last year has largely eliminated a gap that had grown between the two.

Meanwhile, another recent regulatory change has likely made mortgages for investment properties and vacation homes more accessible and less costly.

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.

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.