There are only five months left of 2017, and sky-high rates have yet to materialize.
Market analysts called for 30-year fixed mortgage rates in the mid-4s by the end of 2017. Rates appeared to be moving in that direction in March, when they hit 4.30%. Then, they suddenly turned back.
The development is a boon for home buyers and refinance shoppers.
According to Black Knight Financial Services, more than four million homeowners could now benefit from a refinance, and save a collective $1.1 billion per month.
Home buyers are faring well, too. Buying power is up, and low rates are helping compensate for rising home prices.
Is August 2017 the month in which buyers and owners take advantage of low rates? Maybe. Those who don't may be sorry.
Rates aren't guaranteed to stay low, and high-rate forecasters may be proven correct by year's end.
Right now is a fantastic time to secure a low rate.Click to see today's rates (Aug 19th, 2017)
The average conventional 30-year fixed rate mortgage just can't break out of the sub-4% range.
Freddie Mac's Primary Mortgage Market Survey (PMMS) revealed that rates averaged just 3.97% the four weeks ending July 27. Rates rose briefly to 4.03% during one week of the month, only to sink again below the psychologically important four percent mark.
That's notable, considering rates averaged 4.20% in March.
But Freddie Mac isn't the only rate-tracker in the business. What do other sources say?
Loan software firm Ellie Mae runs 3 million mortgages through its system per year, and tracks many pieces of data, rates being one of them. The company says rates fell across the board in June, the most recent month for which data is available.
USDA mortgage rates track right alongside VA rates.
You might notice that Ellie Mae says rates are higher than Freddie Mac does. It's all about methodology.
Freddie Mac's rates are based on quotes from 125 lenders across the country. These lenders give a hypothetical rate based on an ideal candidate: one with a high down payment, great credit, and who is paying mortgage points.
Ellie Mae's rates, however, consider a mix of applicants -- those who actually get loans. Some with good credit, others with credit "dings" -- some who put down 50%, some who put down nothing at all.
Plus, Ellie Mae publishes FHA, VA and conventional rate averages, where Freddie Mac only reports conventional ones.
The mortgage shopper isn't normally concerned with how various companies average rates differently.
What is of interest, though, is that there is really no "average rate."
There are only personal rates.
The only way to find yours is to run your complete scenario by a mortgage lender. Then compare their rate-and-fee structure with that of other lenders to make sure you're getting the best value.
You probably wouldn't buy a car without shopping around first. But, surprisingly, many consumers take their first quoted rate.Click to see today's rates (Aug 19th, 2017)
Economic data could move markets in August. The most watched development might have to do with inflation, and how the Federal Reserve interprets the data.
If you follow mortgage rates closely, you may know that inflation is a big deal.
When prices throughout the economy rise, it's likely that mortgage rates do, too. That's because investors like to see a positive return on investment.
It might not seem like inflation has much to do with mortgage rates. But inflation eats into the value of investments with fixed rates of return, like mortgage-backed securities upon which consumer mortgage rates are based.
For instance, if you loan out money at 4% annual interest, and inflation rises to 5%, you're losing 1% of your money per year. That's why investors watch inflation closely.
In 1980, the rate of inflation peaked at over 13% annually, according to the Bureau of Labor Statistics. The 30-year mortgage rate topped out at more than 16% that year, says Freddie Mac.
Fortunately, we're experiencing the other side of inflation now. It's very low, and mortgage rates are following suit. That could continue into August.
There are lots of ways to measure inflation, but the Federal Reserve likes the "personal consumption expenditures", or PCE, reading. The "core PCE" measures what consumers are actually spending on goods and services, stripping out food and energy costs. (These two items are too volatile to consider, says the Fed.)
Because the Federal Reserve sets the tone for interest rates, investors pay close attention to how the central bank measures inflation.
The core PCE reading in May was just 1.4% annually, says the U.S. Bureau of Economic Analysis. That's down from 1.8% in January.
So, what's wrong with that? Well, the Fed's mandate is to keep inflation near 2%. The more it raises rates, the more it is slowing down inflation.
Raising rates slows down economic activity, thereby slowing price gains within the economy.
Yet, the Fed is on track to raise its Federal Funds Rate for the fourth time in a year, and that could happen as soon as December.
The Fed's rate-raising schedule seems counter to its mandate.
Thus far, the Fed has attributed falling inflation to "a few unusual reductions" in certain price measurement categories. According to CNBC, the mysterious comment by Fed Chair Janet Yellen during her July testimony to Congress may refer to falling prices for cellular phone service and prescription drugs.
But it's hard to imagine these minor costs swaying inflation as a whole. Most analysts are still scratching their heads about Yellen's statement.
At first glance, it appears the Fed is downgrading low inflation. Yet, in a statement following July's Federal Reserve meeting, the Fed stated plainly that inflation was running "below 2 percent" -- changing the wording from "somewhat below 2 percent" as stated in previous remarks.
The Fed seems to be both confirming and denying that inflation is turning lower.
Investors take their cues largely from the Fed. If the U.S. central bank comes out and says "inflation is too low, and we're veering from our rate-hike strategy" -- you can bet that consumer mortgage rates will fall significantly.
August will be a key period to watch inflation numbers. While it's the first month since April in which the Fed won't meet, it could play a more significant role than most other months this year.
That's because not one, but two core PCE readings will be released this month -- on August 1 and August 31.
If inflation stays near the 1.4% mark or drops, the Federal Reserve may not be able to pass off falling inflation as "transitory." Rates may fall on a revised stance from the Fed.
The group meets again on September 19-20. That could be a very interesting meeting if inflation stays so stubbornly low.Click to see today's rates (Aug 19th, 2017)
Remember that mortgage rates are determined by the market, not by the Fed. The U.S. central bank certainly influences consumer mortgage rates, but it doesn't control them.
Market forces are too many to mention in one article, but among them are inflation -- as discussed above -- plus employment, wages, housing, oil prices, foreign monetary policy, and even geopolitical conflict.
The following is a list is a primer on how these factors influence mortgage rates.
Employment. Low unemployment means the economy is probably doing well. Good economic times are bad for mortgage rates.
A dropping unemployment rate and more workers entering the work force could lead to higher rates. Watch for the Employment Situation report to be released on August 4.
Wages. Rising wages lead to something called "wage-push inflation" within the economy. Low unemployment means corporations must compete for workers. They compete by paying higher wages, both for new and existing employees.
But that money has to come from somewhere.
Companies start charging more for goods and services to pay for rising employee costs. That pushes up prices for everyday items.
Housing. A prospering housing not only fuels the economy, but it's a solid indicator that the economy is doing well.
After all, People have to have good jobs and feel confident about the future to buy a home. Plus, according to the National Association of Home Builders, housing makes up 15-18% of the economy.
When that segment is doing well, it's likely the broader economy is, too. So, when you hear reports of a gangbusters housing market, that could be bad for mortgage rates. It indicates the economy is doing well, and low mortgage rates don't often last long in a heated economy.
Watch for the Housing Starts report on August 16, New Home Sales on August 23, and Existing Home Sales on the 24th.
Oil Prices. Oil affects prices for just about everything. Your groceries are delivered to grocery stores via diesel-powered trucks. Airline tickets go up and down with fuel prices. And consumers feel it directly when a fill up goes from $40 to $60 for no apparent reason.
Mortgage rates rise with higher inflation, and there's nothing that can kick inflation into high gear like skyrocketing oil prices.
Watch for the Energy Information Administration (EIA) Petroleum Status Report each Wednesday in August. This reports detail petroleum inventory conditions in the U.S. As in all markets, limited inventory leads to higher prices.
Foreign monetary policy. This is a big one. Recently, the European Central Bank (ECB) announced it might pull back economic stimulus sooner than expected. Mortgage rates rose.
The ECB currently purchases 60 billion euros per month in securities. That increases demand for bonds worldwide, including mortgage-backed securities. When demand falls for securities, mortgage rates rise. Watch for ECB announcements in August about its bond-buying program.
Geopolitical conflict. In general, mortgage rates drop in times of political uncertainty. Wars and rumors of wars spur a "flight to safety" response among investors. Mortgage-backed securities are viewed as safer than the stock market in unsure times. Demand for safe assets pushes down rates.
Many other factors influence mortgage rates. Sometimes rate movements make no sense to the average consumer, and that's okay.
There's a lot to understand. That's one reason The Mortgage Reports launched its Daily Rates and Lock Recommendations update.
Each day, we tell you what you can expect for mortgage rates that day and that week. That takes a lot of the guesswork and, honestly, fear out of deciding when to lock.
Of course, there are no guarantees, but the daily updates are a great place to start when deciding when to shop for a mortgage rate.
The next thirty days hold no shortage of market-moving news. Most notably, watch for PCE inflation numbers released at the beginning and end of August. Results from these reports will sway the Federal Reserve's decision about interest rate hikes in September.
Now could be the time to lock in a rate in case inflation ticks up this month.
Mortgage rates are holding below 4 percent, to the surprise of analysts. Home buyers have excellent purchasing power; and refinancing households can save more cash than they could just months ago.
Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Click to see today's rates (Aug 19th, 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.
Don B. Retired
The Mortgage Reports has helped me so much. I can't thank you enough.
Theresa D. President, Title Services
The Mortgage Reports gives me an overview of what's happening with mortgages both locally and nationally. I really enjoy it.
Ricardo P. Project Manager
The Mortgage Reports is awesome. The site is extremely helpful, keeps you up-to-date, and puts you ahead of the game. Add The Mortgage Reports to your reading list!
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)