Mortgage and refinance rates today, May 28, and rate forecast for next week

Today’s mortgage and refinance rates

Average mortgage rates barely moved yesterday. However, as a whole, the week has been kind to those rates. Don’t get too excited. They haven’t fallen far. But at least they’re finally heading in the right direction for now.

I’m still not comfortable predicting where mortgage rates will move next week. There’s too much uncertainty and volatility for me to do more than hazard a guess. They really could go either way.

But they won’t be going anywhere on Monday. Because it’s Memorial Day and markets are closed. So we’ll be back on Tuesday morning.

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.

Nothing’s changed since last week. And mortgage rates remain entirely unpredictable. Indeed, markets generally have been swinging wildly, alternating between periods when they tumble and those when they skyrocket.

Part of the reason I’m still suggesting locking your rate soon is that I’m naturally cautious. But I also bear in mind that “losses loom larger than gains” in most people’s minds.

And 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

Last week, I quoted from The Wall Street Journal (paywall) on stock market indexes last Friday. It had reported: “The Dow industrials notched their eighth straight weekly loss, their longest such streak since 1932, near the height of the Great Depression.”

This week, I’ll quote from the same source yesterday on stock market indexes. It said: “The S&P 500 raced higher Friday, notching its best week of the year and snapping a punishing losing streak that had almost ended its bull market.”

And it wasn’t just the S&P 500. The Nasdaq composite did even better. And Dow Industrials also rose, though more modestly.

The Journal went on to say:

For months, worries about high inflation and the path of Federal Reserve rate increases have weighed on the market. Investors have grown concerned that interest rate hikes could tip the economy into a downturn. … Fears of that worst-case scenario appeared to abate this week.

Of course, the relationship between bond markets and the stock market is imperfect. Still, if that new optimism takes hold in the market for mortgage-backed securities (the bond market that largely determines mortgage rates), we might see mortgage rates continue to fall.

The two main drivers of higher rates this year have been hot inflation and fear that the Fed’s rate hikes could lead to a recession or even “stagflation” (stagnant growth with high inflation). So the perception that those threats have diminished could be good news for those rates.

Doubts and suspicions

But I still have nagging doubts. Yes, this week’s PCE inflation report suggested prices may have peaked in April. But one month’s data can’t be regarded as definitive. And Russia’s invasion of Ukraine continues. That’s been a major contributor to inflation over the last three months. We’re not out of those woods yet.

Meanwhile, the Fed remains determined to hike rates sufficiently to tame inflation, regardless of its actions’ impact on growth. We already know that three large (0.5%) rate increases are likely in June, July and September.

And we’ve seen over the last couple of weeks how quickly moods in markets can change. And I suspect this week’s sunny optimism may not last long enough to deliver significant and sustained drops in mortgage rates.

But let’s hope I’m wrong. It wouldn’t be the first time.

Economic reports next week

We’re due May’s official employment situation report on Friday. That’s always important, although it may be less so now that markets are so obsessed with inflation. Economists polled by MarketWatch are expecting fewer new jobs in this report than in the previous one. But, given how high employment rates are now, that probably won’t bother markets too much.

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.

• Monday — Memorial Day. Markets closed and no reports
• Tuesday — March home price indexes from S&P Case-Shiller and the Federal Housing Finance Agency. Plus May consumer confidence index
• Wednesday — April JOLTS (Job Openings and Labor Turnover Survey). Plus, May manufacturing indexes from S&P Global and the Institute for Supply Management (ISM)
• Thursday — May ADP employment report on private-sector jobs. Plus, weekly new claims for unemployment insurance to May 28
• Friday — May employment situation report, including nonfarm payrolls, unemployment rate and average hourly earnings. Plus May indexes for the services sector from S&P Global and the ISM

This week, it’s all about Friday.

Mortgage interest rates forecast for next week

For the second week in a row, I’m ducking making a prediction about mortgage rates next week. There’s too little certainty and too much volatility for me to make even an informed guess.

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.