Mortgage and refinance rates today, May 21, and rate forecast for next week

Today’s mortgage and refinance rates

Average mortgage rates inched higher yesterday. And they hardly moved over the week; they merely ticked up. Yes, all those screaming headlines about market meltdowns and looming disaster hardly touched these rates over the last seven days.

Yesterday, stock markets started by moving higher. Then, by lunchtime, they were plummeting. Finally, during the late afternoon, they began climbing again. When there’s so much volatility in a single day, predicting market trends over a week is folly. So, I’m going to come clean, and admit I have no idea where mortgage rates will be in seven days’ time.

Current mortgage and refinance rates

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Should you lock a mortgage rate today?

Don’t lock on a day when mortgage rates look set to fall. My recommendations (below) are intended to give longer-term suggestions about the overall direction of those rates. So, they don’t change daily to reflect fleeting sentiments in volatile markets.

With markets so uncertain, only you can decide when to lock your mortgage rate. I shouldn’t be a bit surprised whether they move higher or lower over the next week. So, I’m in no position to guide you.

If I were you, I’d lock my rate soon. But that’s because I’m cautious. If you’re more daring, nobody could criticize your for waiting in the hope of further falls.

Still, 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

It’s a long time since we’ve seen such turmoil in markets. Literally. Yesterday, The Wall Street Journal (paywall) reported: “The Dow industrials notched their eighth straight weekly loss, their longest such streak since 1932, near the height of the Great Depression.”

Part of the reason stock markets are in a bad way is excessive talk that borders on the apocalyptic. Comparisons with the Great Depression may be technically true but there’s little about the current economy that’s similar to how things were back then. Today, we have low unemployment and decent growth.

And it’s the same when people keep talking about “stagflation,” which is when you see stagnant growth in gross domestic product (and high unemployment) at the same time as very high inflation rates. In a New York Times e-newsletter yesterday, economist Paul Krugman explained how any stagflation that arises soon (and it sure ain’t here yet) is much more likely to resemble the episode in 2007-08 than the one in the early 1980s.

We’re not going back to the ‘80s

The later of those was much briefer and less painful than the earlier bout. Yet there’s plenty of talk about a return to the ‘80s. And that’s highly unlikely. Dr. Krugman wrote:

What was the difference between these episodes? At the beginning of the 1980s, inflation was deeply entrenched in the economy, in the sense that everyone expected high inflation not just in the near term but also for the foreseeable future; companies were setting prices and negotiating wage deals on the assumption of continued high inflation, creating a self-fulfilling inflationary spiral. It took a huge, sustained uptick in unemployment to break that spiral. In 2008, by contrast, while people expected high inflation in the near future — probably because they were extrapolating from higher gasoline prices — their medium-to-long-term expectations about inflation remained fairly low.

And it’s that 2008 scenario that we’re seeing now.

What this means for mortgage rates

All this is important to mortgage rates. Those normally fall when the economy encounters a recession.

But it might be different this time. The Federal Reserve is committed to countering inflation with rate hikes, as it was in the early 1980s. And, in February 1982, mortgage rates touched their highest level ever: 17.6% for a 30-year, fixed-rate mortgage.

Of course, nobody’s suggesting we’re likely to encounter such high rates anytime soon — or, with luck, anytime not so soon. But don’t count on a recession or stagflation to drag them lower.

At some point in the coming week or weeks, markets may well get a grip and the current volatility subside. At that point, I suspect mortgage rates might begin to edge higher again, at least until inflation show sure signs that it’s peaked and is beginning to fall.

But, in the meantime, I have no clue where those rates will head. And I doubt anyone else does.

Economic reports next week

By far the most important economic report due out next week will appear on Friday and is that for April’s Personal Consumption Expenditures (PCE) price index. It’s the Fed’s preferred measure of inflation. And markets will be hoping this shows that inflation is starting to turn around and fall. If that’s the case, it might be good for mortgage rates.

On Wednesday, we’ll see the minutes of the last meeting of the Federal Open Market Committee (FOMC), which is the Fed’s monetary policy body. Investors will be poring over these in the hope of gleaning additional clues to coming Fed actions.

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 — April new homes sales. Plus May purchasing manager indexes (PMIs) for the services and manufacturing sectors from S&P Global
• Wednesday — FOMC minutes and April durable goods orders
• Thursday — Second reading (of three) of the first quarter’s gross domestic product. Plus weekly new claims for unemployment insurance to May 21
• Friday — April PCE data, including inflation, real disposable income, real consumer spending and so on. Plus May consumer sentiment index

Watch out for Wednesday and Friday!

Mortgage interest rates forecast for next week

I hate to cop out, but I can’t predict what will happen to mortgage rates next week. Sorry, but with so much uncertainty and volatility, I can’t begin to guess what might occur.

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.