What’s Driving Mortgage Rates Today?
There are no important economic reports due today, but there is a Treasury auction of 10-year Notes. If it goes well, rates could fall. If investors aren’t interested, rates could rise.
Currently, yields on ten-year Treasuries have dropped three basis points (3/100th of one percent), That’s good f mortgage rates. All three major stock indexes are down this morning (good for rates). Oil is up but below $47 a barrel, so I call that neutral. Gold is up — an indicator of economic instability and good for mortgage rates.
CNNMoney’s Fear & Greed Index has risen by 5 points from a neutral 50 to a greedy 55. That’s something to keep an eye on, and not good for interest rates.Verify your new rate (Sep 22nd, 2019)
Mortgage Rates Today
(As of 11:30 PDT)
|Conventional 15 yr Fixed||3.250||3.250||Unchanged|
|Conventional 5 yr ARM||3.125||3.723||Unchanged|
|30 year fixed FHA||3.375||4.341||-0.14%|
|15 year fixed FHA||2.875||3.760||-0.48%|
|5 year ARM FHA||3.000||3.991||+0.05%|
|30 year fixed VA||3.500||3.663||-0.25%|
|15 year fixed VA||3.000||3.307||Unchanged|
|5 year ARM VA||3.250||3.275||-1.0%|
Tomorrow should be another quiet day on the mortgage front. There are no economic reports expected, and just one Treasury auction. Here is how the rest the week will look:
- 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.
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.