Mortgage rates today, January 3, plus lock recommendations
What's driving current mortgage rates?
Mortgage rates today have opened unchanged, as investors ignored this morning's financial reporting and continued to wait for Friday's Employment Report.
The Institute For Supply Management released its ISM Manufacturing Index for December. The index tracks where production managers in the US feel their business is heading -- anything over 50 means business is increasing. Experts anticipate that the index will drop slightly from last month's 58.2 to 58.0. We got a rise, however, to 59.7. This could hurt rates if anyone pays attention to it -- the report is known to be volatile.Verify your new rate (Apr 26th, 2018)
Mortgage rates today
|Conventional 30 yr Fixed||4.038||4.049||Unchanged|
|Conventional 15 yr Fixed||3.58||3.599||Unchanged|
|Conventional 5 yr ARM||3.688||3.941||Unchanged|
|30 year fixed FHA||3.833||4.834||Unchanged|
|15 year fixed FHA||3.25||4.198||Unchanged|
|5 year ARM FHA||3.563||4.468||Unchanged|
|30 year fixed VA||3.833||4.019||Unchanged|
|15 year fixed VA||3.375||3.685||Unchanged|
|5 year ARM VA||3.625||3.671||Unchanged|
(Note that FHA APRs include required mortgage insurance.)
Financial data that affect today's mortgage rates
Many indicators point to rising rates in the short-term, but have been offset by other factors so far. The trend is higher, however. If you have a loan closing soon, that's something to consider carefully.
- Major stock indexes opened slightly higher (bad for mortgage rates)
- Gold prices continued their upward trajectory, rising another $4 an ounce to $1,318. (The trend 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 rose $1 a barrel to $61 (that's bad for rates because higher energy prices play a large role in creating inflation.)
- The yield on ten-year Treasuries remained at 2.46 percent (neutral, because mortgage rates tend to follow Treasuries).
- CNNMoney’s Fear & Greed Index rose 6 points (following yesterday's 8 point increase) to 66, into the "greed" level.That's a bad trend for rates, because in this case, greed is NOT good. "Fearful" investors push rates down as they leave the stock market and move into bond points s, 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 is holiday-shortened, but we will get some important reports.
- Thursday brings the weekly Unemployment Claims report, which will probably be overlooked as investors await Friday's much more important monthly report. However, if actual numbers vary significantly from expectations, (more unemployment means better mortgage rates), they can move interest rates. Experts believe claims will have fallen by 5,000 to 240k.
- Thursday, we get the ADP Employment report. This is hiring data from the largest payroll processor in the country. Investors watch it because many believe it provides clues about the more important Monthly Employment report from the Labor Department, which can change rates drastically.
- Friday brings the most important data, the monthly Employment Situation report for December. Analysts expect the unemployment rate to remain at 4.1 percent, and for the economy to have added 190,000 jobs. Anything significantly different could rock the mortgage rate market, so pay attention if you are floating an interest rate.
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. Because rates have been so stable, you can probably get away with waiting an extra day or two to get a better rate -- for instance, if your closing is 16 days out, you might want to wait a day and get a cheaper 15-day lock instead of a 30-day lock.
- LOCK if closing in 7 days
- LOCK if closing in 15 days
- FLOAT 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 (Apr 26th, 2018)
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