Mortgage rates are trending unchanged-to-lower today as markets seem to be heading out early for Memorial Day weekend.
The biggest news of the day is GDP -- Gross Domestic Product -- which rang in at an annualized 1.2% for the first quarter. This is higher than the original estimate of 0.7%, but still below where experts say the economy should be.
It's a slightly positive report (bad for rates) but offset by the reminder that the economy is still dragging its fee.
Mortgage rates are little affected by the news.Click to see today's rates (Jul 20th, 2017)
(as of 11:30 am EDT)
|Conventional 30 yr Fixed||3.750||3.750||Unchanged|
|Conventional 15 yr Fixed||3.125||3.125||Unchanged|
|Conventional 5 yr ARM||3.000||3.629||-0.04%|
|30 year fixed FHA||3.250||4.212||+0.01%|
|15 year fixed FHA||2.750||3.626||Unchanged|
|5 year ARM FHA||2.875||3.993||Unchanged|
|30 year fixed VA||3.375||3.537||Unchanged|
|15 year fixed VA||2.875||3.181||Unchanged|
|5 year ARM VA||3.125||3.277||-0.01%|
This morning's data is somewhat favorable for interest rates.
I expect mortgage rates to increase todayÂ unless something newsworthy breaks or the Fed drops a bombshell on us. If I like a rate, I'll probably lock. Your own goals and tolerance for risk may vary.
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)