Mortgage rates today, December 22, plus lock recommendations

Gina Pogol
Gina PogolThe Mortgage Reports Contributor

What’s driving current mortgage rates?

Mortgage rates today got a lot of data to move them around.

Consumer Sentiment fell from 98.5 to 95.9. That’s not good for future  spending, but nice for rates. Durable goods orders also disappointed, rising 1.3 percent instead of the expected 2.0 percent.

Offsetting this good news (for rates) was some good news for the economy. The Commerce Department reported that New Home Sales hit their highest level since July 2007. That’s great for builders but can increase costs for mortgage borrowers. In addition, Consumer Spending jumped .6 percent, while personal income rose just .3 percent.

The overall U.S. economy appears stable, so the worst may be behind us for rate increases. Int grew at an annual pace of 3.2 percent in the third quarter and 3.1 percent in the second. Unemployment has dropped to a 17-year 4.1 percent, helping boost consumer confidence.

Verify your new rate (Oct 18th, 2018)

Mortgage rates today

Program Rate APR* Change
Conventional 30 yr Fixed 4.122 4.133 Unchanged
Conventional 15 yr Fixed 3.625 3.644 -0.04%
Conventional 5 yr ARM 3.688 3.941 Unchanged
30 year fixed FHA 3.917 4.918 Unchanged
15 year fixed FHA 3.25 4.198 Unchanged
5 year ARM FHA 3.563 4.468 Unchanged
30 year fixed VA 3.917 4.104 -0.04%
15 year fixed VA 3.438 3.748 Unchanged
5 year ARM VA 3.75 3.716 +0.05%

Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Financial data that affect today’s mortgage rates

Most indicators are neutral-to-good for rates.

  • Major stock indexes opened lower (good for mortgage rates)
  • Gold prices rrose $11 an ounce to 1,279. (That is very good for mortgage rates. 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 remained at $58 a barrel (neutral for mortgage interest rates. Higher energy prices play a large role in creating inflation.)
  • The yield on ten-year Treasuries dropped one basis point (1/100ths of 1 percent) to 2.49 percent! (an improvement, but still bad for rates, because mortgage rates tend to follow Treasuries and this is still pretty high).
  • CNNMoney’s Fear & Greed Index fell 5 points to 65, moving in a more neutral direction. That’s good. This is one case in which greed isn’t good. “Fearful” investors push rates down as they leave the stock market and move into bonds, while “greedy” investors do the opposite. That causes rates to rise.

Mortgage rates today remain very favorable for anyone considering homeownership. Residential financing is still affordable.

Next Week

Next week is holiday-shortened, with few economic indicators and low trading volume. This can make things a little volatile. We will provide an update for what’s ahead tomorrow.

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.

The Ten-Year Treasury Index hitting 2.50 percent is concerning — a psychological wall that, if broken, could send rates shooting up. I’d lock if I had anything fixed closing soon.

  • 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

Video: More about mortgage rates

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 (Oct 18th, 2018)