Mortgage Rates Today, Friday, February 20: A Noticeable Jump

Mortgage interest rates are higher this morning, and though we’re still in exceptionally low territory, it might not last much longer.

The average interest rate on a 30-year, fixed-rate mortgage jumped to 5.92% APR, according to rates provided to NerdWallet by Zillow. This is 15 basis points higher than yesterday but still two basis points lower than a week ago. (See our chart below for more specifics.) A basis point is one one-hundredth of a percentage point.

Last Friday, unexpectedly positive inflation data brought on a significant rate drop. This morning, however, different inflation data came in that may be bad news for mortgage rates — get the scoop below the graph.

While the economy never sleeps, markets are closed on the weekends. The rates you see Friday are unlikely to change much (if at all) until Monday.

Mortgage rates are constantly changing, since a major part of how rates are set depends on reactions to new inflation reports, job numbers, Fed meetings, global news … you name it. For example, even tiny changes in the bond market can shift mortgage pricing.

Last week, mortgage rates dropped in a somewhat outsized reaction to better-than-expected inflation data from the January Consumer Price Index (CPI) released Feb. 13. That party could only last so long though, since today we got new data on a different measure of inflation, personal consumption expenditures (better known as PCE).

It’s not a perfect apples-to-apples comparison between these two data sets. They measure inflation differently, and since last fall’s shutdown has the Bureau of Economic analysis running behind, today’s PCE numbers were from December. Still, these are close enough that we could call it a Granny-Smith-to-Red-Delicious comparison. They’re different, but they’re both apples.

And if that’s the case, PCE is the mealy Red Delicious. Both the overall and core numbers came in higher than some expected. (Core PCE cuts out food and energy, which can be erratic.) Core PCE had a 3% year-over-year increase. Meanwhile, the Federal Reserve targets a 2% rate of inflation — and the central bankers prefer PCE to CPI as a more accurate indicator.

The Fed pumps the brakes on inflation by raising the federal funds rate, hoping higher borrowing costs discourage spending. But way before the central bankers make any decision (their next meeting is Mar. 17-18), mortgage rates could start moving higher if hopes of a spring or early summer rate cut start to dwindle.

Even without PCE, the forecast for the low rates parade was looking rainy. Minutes from the Federal Reserve’s January meeting, which were released on Wednesday, showed that inflation remains a significant concern for the central bankers. They voted to hold the funds rate steady in January, but looking ahead, there were three camps: Those who felt future rate cuts were likely, those who thought the current rate would be maintained for a while, and a group that was open to the possibility of raising rates.

That third group, which judged that “upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels,” got markets’ attention. We’d all kind of been assuming that the argument was hold versus cut, and rate hikes weren’t really on the table. While the Fed raising the funds rate is still pretty unlikely (markets don’t see it happening), this inflation news is likely to further dampen enthusiasm for cuts.

Refinancing might make sense if today’s rates are at least 0.5 to 0.75 of a percentage point lower than your current rate (and if you plan to stay in your home long enough to break even on closing costs).

With rates where they are right now, you could start considering a refi if your current rate is around 6.42% or higher.

Also consider your goals: Are you trying to lower your monthly payment, shorten your loan term or turn home equity into cash? For example, you might be more comfortable with paying a higher rate for a cash-out refinance than you would for a rate-and-term refinance, so long as the overall costs are lower than if you kept your original mortgage and added a HELOC or home equity loan.

If you’re looking for a lower rate, use NerdWallet’s refinance calculator to estimate savings and understand how long it would take to break even on the costs of refinancing.

There is no universal “right” time to start shopping — what matters is whether you can comfortably afford a mortgage now at today’s rates.

If the answer is yes, don’t get too hung up on whether you could be missing out on lower rates later; you can refinance down the road. Focus on getting preapproved, comparing lender offers, and understanding what monthly payment works for your budget.

NerdWallet’s affordability calculator can help you estimate your potential monthly payment. If a new home isn’t in the cards right now, there are still things you can do to strengthen your buyer profile. Take this time to pay down existing debts and build your down payment savings. Not only will this free up more cash flow for a future mortgage payment, it can also get you a better interest rate when you’re ready to buy.

If you already have a quote you’re happy with, you should consider locking your mortgage rate, especially if your lender offers a float-down option. A float-down lets you take advantage of a better rate if the market drops during your lock period.

Rate locks protect you from increases while your loan is processed, and with the market forever bouncing around, that peace of mind can be worth it.

The rate you see advertised is a sample rate — usually for a borrower with perfect credit, making a big down payment, and paying for mortgage points. That won’t match every buyer’s circumstances.

In addition to market factors outside of your control, your customized quote depends on your:

Even two people with similar credit scores might get different rates, depending on their overall financial profiles.

Maybe — but even personalized rate quotes can change until you lock. That’s because lenders adjust pricing multiple times a day in response to market changes.