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Posted 07/12/2017

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Mortgage Rates Today, July 12, Plus Lock Recommendations

mortgage rates today

What's Driving Mortgage Interest Rates

Mortgage rates today fell after Federal Reserve Chair Janet Yellen released notes from the speech she will give Congress later this afternoon. The Fed will also release its Beige Book, which contains notes from the previous meeting. Investors follow this stuff avidly, as it may offers clues about the timing of possible rate increases.

Yellen's statement read, in part, "Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance."

Meaning rate increases may be smaller and / or fewer than previously expected.

Mortgage Rates Today

(As of 10:30 am EDT)

Program Rate APR* Change
Conventional 30 yr Fixed 3.875 3.875 Unchanged
Conventional 15 yr Fixed 3.125 3.125 Unchanged
Conventional 5 yr ARM 3.250 3.735 -0.04%
30 year fixed FHA 3.500 4.443 -0.01%
15 year fixed FHA 2.875 3.773 -0.04%
5 year ARM FHA 3.000 4.125 Unchanged
30 year fixed VA 3.625 3.775 Unchanged
15 year fixed VA 3.000 3.307 -0.13%
5 year ARM VA 3.375 3.453 Unchanged

Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Today's Data

Today's indicators are a completely schizophrenic mixed bag. Probably none of them as important as Ms. Yellen's remarks.

  • Major stock indexes are all up significantly (bad for rates)
  • Gold is up by $10 to $1,218 (good for rates, because gold rises when the economy softens)
  • The yield for ten-year Treasuries fell six basis points (6/100ths of one percent) to 2.32 percent (great for rates).
  • CNNMoney’s Fear & Greed Index is up five points to a neutral 48 (bad for rates, because it's moving in a "greedier" direction).

This Week

The latter part of the week brings plenty of reporting that could spike mortgage rates or cause them to fall sharply. Stay tuned

  • Thursday – Weekly Jobless Claims, expected to fall from last week’s 248,000 to 245,000. More is better for rates, and fewer is bad for rates.
  • Thursday – Producer price Index (PPI), which measures economic strength at the wholesale level. Analyst don’t expect this index to move at all, so an increase would be bad for rates, and a decrease would be good.
  • Friday – Consumer Price Index (CPI), a key measure of inflation, which experts predict will rise .1 percent, and Consumer Sentiment, an important indicator of future consumer willingness to spend, expected to increase by .5 to 95.6. Larger increases are bad for rates, while less expansion would be good.
  • Friday – Retail Sales, expected to increase by .1 percent. A larger increase could cause rates to rise, while a drop might cause them to fall.

Rate Lock Recommendation

Mortgage rates are trending up, and there is no reason to believe that they will drop back in the near future.

I would probably lock if rates were in my strike zone and I was closing soon. However, your own goals and tolerance for risk may vary. This is only what I would do.

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • LOCK if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

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 (Sep 23rd, 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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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)