News events, stock prices, and whatever dog and pony show the White House puts on for us are affecting mortgage rates today. Rates opened mostly unchanged today, and early indicators point to possible small increases later.
In general, anything that seems to indicate the economy is worsening, or that inflation does not threaten, is good for rates. And anything that points to rising wages or prices is bad for rates.
(As of 10:30 am EDT)
|Conventional 30 yr Fixed||3.875||3.875||Unchanged|
|Conventional 15 yr Fixed||3.125||3.125||Unchanged|
|Conventional 5 yr ARM||3.125||3.691||Unchanged|
|30 year fixed FHA||3.375||4.318||Unchanged|
|15 year fixed FHA||2.875||3.751||-0.01%|
|5 year ARM FHA||3.000||4.123||Unchanged|
|30 year fixed VA||3.500||3.657||Unchanged|
|15 year fixed VA||3.125||3.402||+0.1%|
|5 year ARM VA||3.250||3.413||-0.04%|
Today's indicatorsÂ are a mixed bag, but are weighted toward increasing mortgage rates.
This week is extremely light on scheduled economic reporting. Investors will probably have better luck with theÂ unscheduled reportingÂ of news events around the world, Presidential tweets, and their gut feelings.
However, in light weeks, less-important reports tend to get more attention than they otherwise would, so it pays to be aware.
It's easy to say "lock" when rates drop. But it costs more to lock for longer periods.Â That must be a consideration when locking for more than 30 days. The better the rate today, the stronger the case for a long-term lock.
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:
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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