What’s driving current mortgage rates?
Mortgage rates today are unchanged. Financial markets in the US close for the Thanksgiving holiday. However, the fed did release the minutes from its latest meeting yesterday afternoon, and that did move the needle before markets closed.
While Fed officials generally felt good about employment, consumer spending and manufacturing, they expressed concern about the latest surge in stock prices, and that a reversal could really damage the economy.
Some members believe that they should be more proactive about raising short-term interest rates, and that there is danger in waiting too long to deal with possible inflation. This lead some analysts to conclude that we will see another rate increase before the end of the year.
Keep in mind, however, that mortgages are long-term debts, not short-term. They are more likely to follow Treasury rates.
Verify your new rate (Dec 12th, 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||Unchanged|
|15 year fixed VA||3.250||3.559||Unchanged|
|5 year ARM VA||3.500||3.626||Unchanged|
Financial data that affect today’s mortgage rates
US financial markets are closed. However, we live in a global economy these days. Some commodity prices and indexes changed since yesterday morning’s report.
- Major stock indexes are not going anywhere because markets are closed.
- Gold prices fell $1 an ounce to $1,291 (That is such a small decrease that i’s fairly neutral. But in general, it;s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower).
- Oil stayed at$58 a barre (neutral for rates, because higher energy prices play a large role in creating inflation)
- The yield on ten-year Treasuries fell two basis points (2/100th of 1 percent) from yesterday’s opening rate, to 2.32 percent (good for rates, because mortgage rates tend to follow Treasuries)
- CNNMoney’s Fear & Greed Index fell one point to 54. 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
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 12th, 2018)