What’s driving current mortgage rates?
Mortgage rates today are mostly unchanged, unless you are lucky enough to be eligible for a VA home loan. those rates dropped like rocks.
This morning, we got a lot of news, including the unemployment numbers that normally come out on Thursdays.
Weekly Jobless Claims fell for the first time in two weeks, but the numbers pretty much came in as expected, and it’s only a weekly report, so not the most important.
Durable Goods Orders, which are purchases of big-ticket items and an indicator of economic health, fell by 1.2 percent, when experts had predicted they would increase by .5 percent. That’s a big deal because it means the economy is perhaps not doing as we as expected. Which is good for mortgage rates.
Consumer Sentiment, on the other hand, fell to 98.5. that would be good for rates, except that economists had anticipated a drop to 98. So this news was slightly better for the economy, which is slightly not-good for rates.
Later today, we’ll get the minutes from the latest Fed meeting. That could cause big rate changes, or nothing at all. It depends on whether they have anything surprising to say. Investors look at these carefully, so if you’re floating a mortgage rate, you should, too. They are released at 2 PM EST.Verify your new rate (Dec 13th, 2018)
Today’s mortgage rates
|Conventional 30 yr Fixed||3.750||3.750||Unchanged|
|Conventional 15 yr Fixed||3.250||3.250||Unchanged|
|Conventional 5 yr ARM||3.375||3.830||Unchanged|
|30 year fixed FHA||3.375||4.360||Unchanged|
|15 year fixed FHA||3.125||4.072||Unchanged|
|5 year ARM FHA||3.250||4.345||Unchanged|
|30 year fixed VA||3.500||3.672||-0.13%|
|15 year fixed VA||3.250||3.559||-0.13%|
|5 year ARM VA||3.500||3.626||-0.04%|
Financial data that affect today’s mortgage rates
Today’s data are all over the place — some good for rates (gold, Treasuries), some bad (oil), and mostly neutral. I don’t expect major rate changes unless the Fed does something really crazy this afternoon.
- Major stock indexes are mixed this morning. Not much change, so pretty much neutral.
- Gold prices rose $10 an ounce to $1,292 (Good for rates. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower).
- Oil rose $1 to$58 (bad for rates, because higher energy prices play a large role in creating inflation)
- The yield on ten-year Treasuries fell one basis point (1/100th of 1 percent) to 2.34 percent (good for rates, because mortgage rates tend to follow Treasuries)
- CNNMoney’s Fear & Greed Index remained unchanged at 55. That’s about as neutral as it gets.
Mortgage rates today remain very favorable for anyone considering homeownership. Residential financing is still affordable.
Thanksgiving takes up the rest of the spotlight this week. Wednesday is the busy day, combining the reports of several days.
Rate lock recommendation
Rate indicators are all over the place today. And this week could be volatile because holiday weeks usually mean less trading, so smaller events can create larger movements. I’d probably wait until next week, unless a need a rate available today.
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 13th, 2018)