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Mortgage rates today, January 4, plus lock recommendations

Gina Pogol
Gina PogolThe Mortgage Reports Contributor

What’s driving current mortgage rates?

Mortgage rates today have opened unchanged, again. The weekly Unemployment Claims report came in unexpectedly high with 250,000 jobs lost. That’s 10,000 more claims than expected. This would normally be good for mortgage rates (less pressure on wages), but another report pretty much nullified this one.

The monthly payroll starts from payroll processing giant ADP came in (coincidentally) with 250,000 new job starts, and that was much higher than the anticipated 188,000. Investors watch this report because many believe it provides clues about Friday’s more important monthly report from the Labor Department.

So, 250,000 lost jobs, 250,000 new jobs — checkmate, no mortgage rate changes.

Verify your new rate (Oct 18th, 2018)

Mortgage rates today

Program Rate APR* Change
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

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

(Note that FHA APRs include required mortgage insurance.)

Financial data that affect today’s mortgage rates

Of course, mortgage rates don’t just jump (or not) based on reports like those mentioned above. Other data have influence, and today’s all point to increasing interest rates.

  • Major stock indexes opened higher (bad for mortgage rates)
  • Gold prices finally reversed their upward trajectory (but only slightly), falling $1 an ounce to $1,317. (That is not 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 another $1 a barrel to $62 (that’s bad for rates because higher energy prices play a large role in creating inflation.)
  • The yield on ten-year Treasuries rose 2 basis points (2/100ths of 1 percent) to  2.48 percent (bad for interest rates, because mortgage rates tend to follow Treasuries).
  • CNNMoney’s Fear & Greed Index rose for the third straight day by 5 points to 71, solidly 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

This week is  holiday-shortened, but we will get some important reports. Especially the Employment Situation 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 may 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.

That said, if you need to hit a certain rate to qualify or make a refinance work, and you can get that rate today, I recommend grabbing it. Things could change massively tomorrow, depending on the employment figures.

  • 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 (Oct 18th, 2018)