What’s driving current mortgage rates?
Mortgage rates today responded definitely and mightily to the government shutdown…..no, they didn’t. But a couple of programs did move, and not in the way we would like. I am noticing that 5-year ARMs have lost most of their advantage, their “spread” between them and longer term fixed loans.
According to Marvin Loh, Senior Global Marketing Strategist and BNY Mellon says, “This aggressive flattening, which has continued into the start of the year, has again raised the specter that the market is signaling heightened recessionary concerns.”
For now, longer-term fixed loans may be the better deal for home buyers and refinancers.
There are no pertinent financial reports for us today, so mortgage rates will take their cues from movements in the stock market and prices for things like gold and oil. Look below for today’s prices and changes, and their effects of interest rates.Verify your new rate (Nov 19th, 2018)
Mortgage rates today
|Conventional 30 yr Fixed||4.27||4.281||Unchanged|
|Conventional 15 yr Fixed||3.875||3.894||Unchanged|
|Conventional 5 yr ARM||3.938||4.029||+0.02%|
|30 year fixed FHA||4.042||5.044||Unchanged|
|15 year fixed FHA||3.438||4.386||Unchanged|
|5 year ARM FHA||3.75||4.541||Unchanged|
|30 year fixed VA||4.042||4.23||+0.04%|
|15 year fixed VA||3.625||3.937||+0.06%|
|5 year ARM VA||4.0||3.807||Unchanged|
Financial data that affect today’s mortgage rates
Today’s early data appear:
- Major stock indexes opened just slightly higher, pretty much a neutral thing (just slightly bad for rates, because rising stocks typically take interest rates with them — making it more expensive to borrow )
- Gold prices fell $1 an ounce to $1,332. (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 stayed put at $63 barrel (neutral, because higher energy prices play a large role in creating inflation.)
- The yield on ten-year Treasuries increased 2 more basis points (after Friday’s shocking 7 point rise) basis points to 2.665 percent. That’s bad for mortgage rates because mortgage rates tend to follow Treasuries.
- CNNMoney’s Fear & Greed Index remains at 78, 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.
This week brings very little financial reporting until later in the week. However, all eyes will be on Washington to see if they can get government running 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
- 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 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 (Nov 19th, 2018)