Mortgage rates today, December 26, plus lock recommendations

Gina Pogol
Gina PogolThe Mortgage Reports Contributor

What’s driving current mortgage rates?

Mortgage rates today are unchanged so far, probably due to light trading, few economic reports and a short holiday week.

We did get October’s Case-Shiller Home Price data. That dealt a major blow to future buyers, as home prices surged 6.2 percent.

This indicates robust economic growth, almost never good for rates. However, higher property prices can create affordability issues, potentially slowing down the demand for homes and mortgages. And that could offset future demand for money. In other words, this morning “we got nothin.”

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 Unchanged
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 Unchanged
15 year fixed VA 3.438 3.748 Unchanged
5 year ARM VA 3.75 3.716 Unchanged

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 mixed, likely to offset each other unless we get some Washington, DC weirdness later. Then all bets are off.

  • Major stock indexes opened mixed and flat (neutral for mortgage rates)
  • Gold prices rose for the third straight day by $8 an ounce to 1,287. (That is 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 crept up $1 to $59 a barrel (bad 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 2.48 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 continued to drop, falling 2 points to 63. While still “greedy, it’s 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.

This Week

This is a holiday-shortened week. Here are this week’s pertinent reports:

  • Tomorrow: December’s Consumer Confidence Index from The Conference Board, expected to fall from it’s November high mark of 129.5 to 128.8. That would be good for mortgage rates, but the expectation is already priced into the market. If we end up with something markedly different, it could change rates — higher would be bad, and lower would be good.
  • Wednesday also brings Pending Home Sales for November from the National Association of Realtors. Last month, the NAR reported a 3.5 percent increase. If the trend continues, rates could see upward pressure.
  • Thursday brings the Weekly Jobless Claims, which is only considered important if it varies significantly from expectations. That’s because it’s known to be volatile, and only represents a week of data. More filings is bad for the economy, but relieves wage pressures and so that’s generally good for rates.

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 nearling 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)