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Posted 05/08/2017

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Mortgage Rates Today, May 8, 2017, Plus Lock Recommendations

mortgage rates today

What's Driving Mortgage Rates Today?

Mortgage rates today do not appear to have been affected by the results of the election in France. Had conservative Marine Le Pen won, concerns about her policies, and possible destabilization of the European economy could have sent mortgage rates into bargain-basement levels.

However, this did not happen; Ms Le Pen lost handily to  Emmanuel Macron, and economic boats have not been rocked.

Click to see today's rates (Jul 24th, 2017)

Mortgage Rates Today

(As of 11:30 PDT)

Today's Mortgage Rates

 

Economic Indicators

There are no economic releases scheduled today. So far there has been little movement. All three major stock indexes are down, which is normally good for rates.

However, yields for ten-year Treasuries are up two basis points (2/100th of one percent). Long-term mortgage rates often move  the same direction as Treasury yields.

Oil is up (could be bad for rates because increasing energy prices cause investors to worry about inflation.) However, prices are well below $50 a barrel, so oil prices are probably not in play today.

Gold, on the other hand, is up -- which normally happens when the economy is uncertain. Increasing gold prices often go hand-in-hand with lower interest rates. CNNMoney's Fear & Greed Index remains solidly in neutral.

What we have is a mixed bag of factors that seem to be offsetting each other -- rates have changed very little so far.

 Tomorrow

Tomorrow should be another quiet day on the mortgage front. There are no economic reports expected, and no Treasury auctions either. Here is how the rest  the week will look:

  • Wednesday -- Treasury auction (10-year Notes). If it goes well, rates could fall. If investors don't bite, rates could rise.
  • Thursday -- Treasury auction (30-year Notes)
  • Thursday -- Producers Price Index (PPI) -- this report tracks inflation at the manufacturing level. he overall index is expected to rise 0.2 percent. Higher is bad for rates, lower is good.
  • Friday: Retail Sales -- This tracks consumer spending, so it's important information. Analysts expect a 0.6 percent increase in sales from March to April. More would be bad for rates; a smaller increase would be good.
  • Friday: Consumer Price Index (CPI) -- Probably the most important report this week, the CPI measures inflation potential at the consumer sector. Exerts anticipate a 0.2 percent increase in the overall index and a 0.2 percent rise in the core data reading. More is bad for rates,; less is good.
  • Friday: University of Michigan's Index of Consumer Sentiment measures consumer confidence and willingness to spend. It is expected to come in at 96.5 (from April's 97.0). A bigger drop would be good for rates.

Rate Lock Recommendation

Until Friday, this is a pretty light week, data-wise. if I have a rate I like, I'd be tempted to set it and forget it. But if you want to gamble on Friday's releases, you may do better. I'd look at Wednesday and Thursday Treasury auction results and see how prices went before deciding. Good auctions mean lower rates; bad auctions (no demand) mean higher rates.

rate lock recommendation

What Causes Rates To Rise And Fall?

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 paying five percent interest ($50) each year. (This is called its “coupon rate.") That’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.

When Rates Fall

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 interest rate: $50 annual interest / $1,000 = 5.0%
  • Your buyer’s interest rate: $50 annual interest / $1,200 = 4.2%

The buyer gets an interest rate, or yield, of only 4.2 percent. And that’s why, when demand for bonds increases and bond prices go up, interest rates go down.

When Rates Rise

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 getting $700. The buyer gets the same $50 a year in interest, but the yield looks like this:

  • $50 annual interest / $700 = 7.1% The buyer’s interest rate is now slightly more than seven percent.
Click to see today's rates (Jul 24th, 2017)

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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