Mortgage rates today, September 26, plus lock recommendations
What's driving mortgage interest rates?
Mortgage rates today took their cues from several reports. Case-Shiller reported that home prices for July came in higher than expected with a 5.9 percent increase in July. This would tend to push rates higher, but keep in mind the information is nearly two months old, so it's less influential than the other two releases.
The Consumer Confidence Index for September dipped to 119.8 from August's levels, largely due to substantial drops in hurricane country after this month's storms. However, analysts had predicted 119.5, so the release had little effect.
Finally, New Home Sales dived unexpectedly, which was very good for rates. It's not the fact that they were much lower in August; it's the fact that the actual numbers caught economists completely off-guard. They had predicted a strong increase of 3.3 percent, and what they got was an even stronger decrease of 3.4 percent. That gave markets whiplash this morning.Verify your new rate (Mar 21st, 2018)
Mortgage rates today
|Conventional 30 yr Fixed||3.750||3.750||Unchanged|
|Conventional 15 yr Fixed||3.000||3.000||Unchanged|
|Conventional 5 yr ARM||3.250||3.703||Unchanged|
|30 year fixed FHA||3.250||4.214||-0.01%|
|15 year fixed FHA||2.875||3.780||-0.01%|
|5 year ARM FHA||3.250||4.203||Unchanged|
|30 year fixed VA||3.500||3.648||-0.01%|
|15 year fixed VA||3.125||3.407||Unchanged|
|5 year ARM VA||3.375||3.457||-0.04%|
This morning's data are mixed but point toward falling rates.
- Major stock indexes are up slightly (slightly bad for rates)
- Gold prices rose $7 an ounce to $1,304 (good for mortgage rates, because gold prices tend to increase when the economy slows, and fall when the economy improves, and economic slowing is good for rates)
- Oil increased $1 to $52 a barrel (bad for rates because higher energy prices create inflation)
- The yield on ten-year Treasuries fell one basis point (1/100th of one percent) to 2.24 percent (good for rates, because they tend to move in the same direction as Treasuries)
- CNNMoney’s Fear & Greed Index rose 1 point to 70. This is bad for rates, because the direction is toward a less fearful state, And the index is in the "Greed" range. Less-fearful investors tend to turn to stocks and from bonds and mortgage-backed securities. When everyone wants to sell their bonds, that pushes prices lower, which in turn causes rates to rise (see below).
Mortgage rates today are still very favorable for home buyers. The climate is highly-encouraging for real estate purchases.
This week contains plenty of action and lots of reporting. If you have a mortgage in process and have not locked an interest rate, pay close attention to economic reports, and stay in contact with your lender.
- Wednesday: Durable Goods orders for August (predicting a 1.1 percent increase, while less would be good for rates), and Pending Home Sales for August (more is bad, fewer is good for rates)
- Thursday: Weekly Jobless Claims (expecting 270,000, but more would be good for rates) and the Gross Domestic Product (GDP) for the second quarter (predicting a 3.1 percent increase, while more would be bad for rates)
- Friday: Personal Income (expecting a .1 percent increase), Consumer Spending (anticipating a .1 percent increase) and the Core Inflation Rate for August (predicting a .2 percent increase) will tend to push rates higher if the numbers come in higher-than-expected
Rate lock recommendation
Given the political instability we've been seeing lately, mortgage rates could do anything. They tend to fall when there is a lot of economic uncertainty. That said, the numbers have been supporting higher interest rates lately -- higher stocks, in general, lower gold, higher oil, higher Treasuries, and a "Greedy" outlook all point to a trend of higher rates.
Here's the recommendation:
- 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.Verify your new rate (Mar 21st, 2018)
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.