What’s driving current mortgage rates?
Mortgage rates today have not changed, on average. That’s probably due to the fact that there has been no major economic reporting yet this week. In addition, other factors that impact current mortgage rates (see below) have not moved much either.
You are probably safe to keep floating your rate, if choosing a shorter lock period will let you pay less for your home loan.Verify your new rate (Dec 10th, 2018)
Mortgage rates today
|Conventional 30 yr Fixed||3.750||3.750||Unchanged|
|Conventional 15 yr Fixed||3.125||3.125||Unchanged|
|Conventional 5 yr ARM||3.250||3.786||Unchanged|
|30 year fixed FHA||3.375||4.360||Unchanged|
|15 year fixed FHA||3.000||3.946||Unchanged|
|5 year ARM FHA||3.250||4.345||Unchanged|
|30 year fixed VA||3.500||3.672||Unchanged|
|15 year fixed VA||3.250||3.559||Unchanged|
|5 year ARM VA||3.500||3.626||Unchanged|
Financial data that affect mortgage rates
Today’s indicators are mixed lot, mostly good or neutral for mortgage rates.
- Major stock indexes are down slightly (slightly good for rates)
- Gold prices rose $8 an ounce (following a $4 increase yesterday) to $1,285 (good for rates, because rising gold prices usually accompany economic uncertainty, which usually drives rates lower.
- Oil remains at $57 a barrel (neutral because it has not changed. However, oil over $50 is concerning, because higher energy prices play a large role in creating inflation, and last week, oil was hovering around the $50 mark)
- The yield on ten-year Treasuries remained at to 2.31 percent (neutral for mortgage interest rates, because mortgage rates tend to follow Treasuries)
- CNNMoney’s Fear & Greed Index fell 9 points, a significant drop, to a reading of 58. That gets us back into “neutral” and out of “greedy.” This is good, because less “greedy” investors tend to turn from stocks and to bonds and mortgage-backed securities. Higher bond prices push rates lower.
Mortgage rates today remain very favorable for anyone considering homeownership. Residential financing is still affordable.
This week is much lighter than usual for economic reporting. We’ve got nothing significant for the first three days.
- Thursday: Weekly Unemployment Claims: more is better for rates, fewer is bad
- Friday: Consumer Sentiment index: Higher is bad for mortgage rates, lower is better
As the week progresses and analysts make predictions for these numbers, we can add more details here. For now, however, you’ll need to look at daily data (below) to see where mortgage rates are heading.
Rate lock recommendation
Mortgage rates have been relatively stable this week, and today’s reporting did little to change that. If you are closing in, say, 16 days, you might want to wait a day or two and get a 15-day rather than a more-expensive 30-day lock. If you’re closing in 32 days, it’s probably worth holding out for a 30-day timeline.
In general, 30-day is the standard price most lenders will (should) quote you. The 15-day option should get you a discount, and locks over 30 days usually cost more.
If you want to “set it and forget it,” though, current mortgage rates are attractive enough to make that an okay move.
- 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. Interest rates and yields are not mysterious. You calculate them with simple math.Verify your new rate (Dec 10th, 2018)