The Commerce Department reported that in January,Â orders for American-manufactured products increasedÂ more than analysts anticipated -- by 1.3 percent over December's numbers. Experts had expected a rise of 1.0 percent. This indicates thatÂ manufacturing activityÂ is picking up and the economy is on the move -- increasing mortgage rates today.
However, this report deals with activity from January. It's now March. And today's indicators don't point to increased economic activity. In fact, all three major stock indexes are down. Oil prices are down. Yields on ten-year Treasuries are unchanged, and gold is up. CNNMoney's Fear&Greed Index is at a Greedy 68, but that's down from the previous reading of 74.
Every one of these indicators points to falling rates, not rising rates.
** FHA APRs include government-mandated mortgage insurance premiums (MIP).Â
There are no important economic reports scheduled for tomorrow. Mortgage rates are likely to take their cues from stock market activity, global events, and perhaps late-night Tweets emanating from the White House.
Mortgage rates today are up sharply. If closing soon, I'd lock. If I were not in a position to ride out today's increase, I'd lock. If risk-averse, I'd lock. Otherwise, I'd give them a chance to come down, because they probably will. Remember that markets are largely fear-driven; rates tend to increase much faster than they drop when the economy cools off.
Note that this is what I would do if I had a mortgage in process today. Your own goals and tolerance for risk may differ.Â
Mortgage interest rates depend on a great deal on the expectations of investors. Good economic news tends to be bad for interest rates, because an active economy raises concerns about inflation. Inflation causes fixed-income investments like bonds to lose value, and that causes their yields (another way of saying interest rates) to increase.
For example, suppose that two years ago, you bought a $1,000 bond payingÂ five percent interest ($50) each year. (This is called its â€ścoupon rate.") Thatâ€™s a pretty good rate today, so lots of investors want to buy it from you. You sell your $1,000 bond for $1,200.
The buyer gets the same $50 a year in interest that you were getting. However, because he paid more for the bond, his interest rate is not five percent.
Your buyer gets an interest rate, or yield, of only 4.2 percent. And thatâ€™s why, when demand for bonds increases and bond prices go up, interest rates go down.
However, when the economy heats up, the potential for inflation makes bonds less appealing. With fewer people wanting to buy bonds, their prices decrease, and then interest rates go up.
Imagine that you have your $1,000 bond, but you can't sell it for $1,000, because unemployment has dropped and stock prices are soaring. You end up gettingÂ $700. The buyer gets the same $50 a year in interest, but the yield looks like this:
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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)