Today is important -- several reports influencing mortgage rates today.
This tracks consumer spending, so it's important information.Â Analysts expected a 0.6 percent increase in sales from March to April. More would be bad for rates; a smaller increase would be good. The actual reading came in with just a .4 percent increase, so that's good news for anyone floating a mortgage rate.
Probably the most important report this week, the CPI measures inflation potential at the consumer sector. Exerts anticipated a 0.2 percent increase in the overall index and a 0.2 percent rise in the core data reading.Â The overall increase met expectations, but the more important core reading only increased by .1 percent. This could be considered good for mortgage rates.
This report measures consumer confidence and willingness to spend. It is expected to come in atÂ 96.5 (from April's 97.0). A bigger drop would be good for rates.
Sadly, the index came in much higher -- at 97.7, consumers are very confident about their economic position, and that indicates willingness to spend. Spending tends to go with inflation, which pushes bond prices down and interest rates up.
With such conflicting reports, we need to examine other factors. The ten-year Treasury yield is way down six basis points (6/100th of of one percent) to 2.34 percent (good), Â oil is down (good), and gold is up (good).
CNNMoney's Fear & Greed IndexÂ has risen by 2 more points to a greedy 62. That's something to keep an eye on, and not good for interest rates. If investors are in a greedy mood, they tend to avoid bonds and mortgage-backed securities,Â causing interest rates to increase.
|Conventional 30 yr Fixed||3.875||3.875||-0.13%|
|Conventional 15 yr Fixed||3.250||3.250||Unchanged|
|Conventional 5 yr ARM||3.125||3.717||-0.01%|
|30 year fixed FHA||3.375||4.357||-0.09%|
|15 year fixed FHA||2.875||3.766||-0.01%|
|5 year ARM FHA||3.000||4.069||+0.05%|
|30 year fixed VA||3.625||3.772||-0.1%|
|15 year fixed VA||3.125||3.416||-0.01%|
|5 year ARM VA||3.250||3.338||+0.06%|
Monday doesn't normally yield reports that pertain to interest rates, but the Fed will release its Senior Loan Officer Survey, which can be interesting. They often ask about lending practices, demand for financing, and predictions of future rate changes.
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.
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.
TheÂ 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)