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Mortgage rates today, January 19, plus lock recommendations

Gina PogolThe Mortgage Reports Contributor

What’s driving current mortgage rates?

Mortgage rates today are NOT the unexpected result of the University of Michigan Consumer Sentiment. The Sentiment index dropped to 94.4 from 95.9 in December. Analysts had expected an increase to 97. The switch in direction should have given the markets a little whiplash.

Consumer confidence usually means upcoming major purchases, good for manufacturers, retailers and the economy. But falling consumer confidence usually indicates the opposite and tends to push mortgage interest rates lower.

So what happened?

Well, there is the fact that unless Congress approves a stopgap measure, the government will grind to a screeching halt as of midnight tonight. Maybe investors see this as a good thing? Mortgage News Daily reports, “As has been the case in recent days, bond markets are trading for reasons that transcend most any economic data or news headline.”

Because none of this makes sense, I’d be tempted to wait if I had a loan not scheduled to close for some time.

Verify your new rate (Aug 21st, 2018)

Mortgage rates today

Program Rate APR* Change
Conventional 30 yr Fixed 4.27 4.281 +0.04%
Conventional 15 yr Fixed 3.875 3.894 +0.04%
Conventional 5 yr ARM 3.875 4.006 Unchanged
30 year fixed FHA 4.0 5.002 +0.04%
15 year fixed FHA 3.438 4.386 Unchanged
5 year ARM FHA 3.75 4.541 Unchanged
30 year fixed VA 4.0 4.188 Unchanged
15 year fixed VA 3.563 3.874 +0.06%
5 year ARM VA 4.0 3.807 +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

Today’s early data appear:

  • Major stock indexes opened mixed and flat, continuing this week’s trend (bad for rates, because rising stocks typically take interest rates with them — making it more expensive to borrow )
  • Gold prices fell $3 an ounce to $1,333. (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 dropped $1 to $63  barrel (a slight improvement if the trend holds; it could help rates because higher energy prices play a large role in creating inflation.)
  • The yield on ten-year Treasuries increased a rather astonishing number of 7 basis points from 2.56 percent to 2.63. That’s   very bad for mortgage rates because mortgage rates tend to follow Treasuries.
  • CNNMoney’s Fear & Greed Index rose 3 points to 78, to the “extreme greed” level. That’s bad for mortgage rates because in this case, greed is NOT 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 brings very little financial reporting until later in the week. However, all eyes will be on the Senate to see if the government will be running Monday or not.

  • Monday — nothing
  • Tuesday — nothing
  • Wednesday — Existing home sales from the National Association of Realtors (NAR)
  • Thursday — Weekly unemployment claims, new home sales, and Leading Economic Indicators
  • Friday — Gross Domestic Product (GDP), durable goods orders

None of these reports, by themselves, have the ability to move markets that much. However, if they move in such a way as to create a trend, that’s a different story. And we will follow that story for you, so stay tuned.

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 need to hit a certain rate to qualify or make a refinance work, and you can get that rate today, I recommend grabbing it. Keep in mind that longer locks can cost at least .125 percent in FEES for 45 days or .25 percent in FEES (not the rate) for a 60-day lock.

I recommend waiting to see what happens before locking if I have the luxury of time.

  • LOCK if closing in 7 days
  • FLOAT 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 now 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 (Aug 21st, 2018)