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Should I Lock My Mortgage Rate? A Forecast Of The Week Ahead.

Dan Green
The Mortgage Reports contributor

Have You Seen Today’s Mortgage Rates?

It’s been a wild year for mortgage rates.

Despite Wall Street calls that rates would rise, pricing has been favorable for most of the year, and rates begin this week near a 4-month best.

After the Federal Reserve failed to raise the Fed Funds Rate at its fifth scheduled meeting of the year last week, investors have poured into mortgage-backed securities (MBS); the asset class upon which mortgage rates are made.

The result is sharply lower rates for U.S. home buyers and refinancing households. Near 3.75% for prime borrowers, today's mortgage rates look excellent and it’s a wonderful time to commit to a Good Faith Estimate.

That is, unless you’re willing to gamble that rates will drop even more.

This week, a series of economic releases and news stories could push rates even closer to all-time lows, which were set in May 2013 when the 30-year fixed neared three percent.

Or, rates could reverse higher and start moving toward 4 percent.

Should you lock your rate or float it? The safe play is to lock it. However, you may not want to discount the chance that mortgage rates have farther to fall.

Click to get today's rates now (May 23rd, 2019).

Mortgage Rates Vary By U.S. Region

According to Freddie Mac’s weekly mortgage rate survey, the conventional 30-year fixed rate mortgage averaged 3.91% last week.

Mortgage rates are regional, though, so borrowers in the Southwest (e.g.; Texas, Arizona) received slightly higher rates than the Freddie Mac average; and, borrowers in the West (e.g.; California, Washington) received slightly lower rates.

Lenders charged borrowers an accompanying 0.6 discount points, on average.

Discount points are one-time fees paid at the time of closing, used to “discount” a borrower’s mortgage rate. A loan with discount points, therefore, comes with a lower rate than a loan without them.

In general, 1 discount point lowers your quoted mortgage rate 25 basis points (0.25%).

For IRS purposes, discount points can be treated as prepaid mortgage interest which is why, in many cases, discount points are tax-deductible.

Each discount point costs one percent of the loan size.

A borrower in Orange County, California, therefore, borrowing at the 2015 conforming loan limit of $625,500 and paying 0.6 discount points, should expect a one-time cost of $3,753 at closing.

Mortgage Rates Lower Than Freddie Mac Report

Freddie Mac reports the 30-year fixed rate mortgage rate at 3.91 percent. However, anybody who is actively shopping for a loan with find rates much below what Freddie Mac’s reporting.

This is because Freddie Mac’s report — while accurate — operates on a time-lag.

Each week, beginning Monday morning, Freddie Mac surveys up to 125 lenders for its mortgage rate report. Lenders are invited to reply immediately, or any time through Wednesday morning. The report is published Thursday.

The majority of lenders, according to Freddie Mac’s website, reply to the survey Monday afternoon or Tuesday morning.

This means that when the survey is published Thursday, it’s being published with data which is 2 days old at minimum.

Some weeks, those two days don’t matter. Last week, however, it did.

The Federal Open Market Committee met last week and the group voted to leave the Fed Funds Rate unchanged near its target range of zero percent. The Fed also announced that the group remains data-dependent and that the Fed Funds Rate won’t likely rise until inflation rates approach two percent.

Fed officials expect two percent inflation to hit by 2018.

The (non-)development caused a massive cash inflow to the mortgage bond market, which caused mortgage rates to drop.

Thursday afternoon, mortgage pricing improved close to 70 basis points which means that a loan which which was quoted with 0.7 discount points Thursday morning required zero discount points whatsoever by the afternoon.

Mortgage rates were down as much as 0.25 percentage points and all of this action occurred after the release of the Freddie Mac mortgage rate survey.

The 3.91% headline mortgage rate is “pre-Federal Reserve”. Today’s market is different. Conventional mortgage rates are closer to 3.75%; and VA and FHA mortgage rate quotes are coming in lower.

If you’re a homeowner who’s just gone into contract, or a homeowner looking to refinance for savings or cash-out, it’s an excellent time to shop for rates.

Mortgage rates are extremely favorable and near 4-month lows.

Click to get a rate quote now (May 23rd, 2019).

Economic Calendar For The Week

With mortgage rates dropping to near 3.75%, there’s little reason to expect rates to climb above four percent between now and the weekend.

However, you can’t discount how news and economic data affects rates on a day-to-day basis.

In general, news which is bad for the U.S. economy is good for consumer interest rates; and news which is good for the U.S. economy leads mortgage rates up.

This week, though, it’s more than just the news. There will also be heavy attention on public speeches made by members of the Federal Reserve, including a Thursday afternoon appearance by Federal Reserve Chairwoman Janet Yellen.

If the Fed speakers hint that the Fed Funds Rate will rise in the near-term, mortgage rates are expected to climb as well — maybe by a lot.

The week’s complete calendar is as follows:

  • Monday : Existing Home Sales; Atlanta Fed President Dennis Lockhart speaks
  • Tuesday : FHFA Home Price Index; Atlanta Fed President Dennis Lockhart speaks
  • Wednesday : 5-Year Note Auction; Atlanta Fed President Dennis Lockhart speaks
  • Thursday : Jobless Claims; New Home Sales; 7-Year Note Auction; Fed Chairwoman Janet Yellen speaks
  • Friday : GDP; Consumer Sentiment; Kansas City Fed President Esther George speaks

In addition to the Fed speakers this week, Friday’s GDP figures to have an outsized effect on mortgage rates, which could affect next weekend’s home buyers and shoppers.

Furthermore, be ready for mortgage rate changes surrounding the mid-week auctions of Treasury debt.

The Treasury market doesn’t correlate to the market for mortgage-backed bonds directly but, because both classes of assets are considered “safe”, when one fares well, the others tends to perform well, too.

Should demand for the 5-year note and 7-year note be strong at auction, it may suggest high demand for mortgage bonds in the market, which will help to lead mortgage rates lower.

What Are Today’s Mortgage Rates?

Today’s mortgage rates have approached their lowest level since May. It’s an excellent time to reconsider a home loan refinance, or to make an offer to purchase a home. Mortgage rates may have more to fall, but maybe not.

Get today’s mortgage rates now. Rates are available with no social security number required to get started, and all quotes come with instant access to your mortgage credit scores.

Click to get today's live rates now (May 23rd, 2019).