What’s driving current mortgage rates?
Mortgage rates today will get no guidance from financial data. There are no reports and rates will move based on rumors, stock market changes and global political news. They opened unchanged but have risen slightly this morning.
Mortgage rates today
|Conventional 30 yr Fixed||4.542||4.553||Unchanged|
|Conventional 15 yr Fixed||4.083||4.102||Unchanged|
|Conventional 5 yr ARM||4.063||4.606||Unchanged|
|30 year fixed FHA||4.5||5.507||+0.08%|
|15 year fixed FHA||3.625||4.575||Unchanged|
|5 year ARM FHA||3.875||5.002||Unchanged|
|30 year fixed VA||4.542||4.736||+0.04%|
|15 year fixed VA||3.75||4.063||Unchanged|
|5 year ARM VA||4.125||4.287||+0.05%|
Financial data affecting today’s mortgage rates
Today’s financial data seem to point to stable or decreasing interest rates. There is little pressure to lock in today unless rates drop into your strike zone this afternoon.
- Major stock indexes opened lower (good for rates, because rising stocks typically take interest rates with them — making it more expensive to borrow)
- Gold prices rose for the second straight day, this time by $13 to $1,339 an ounce. (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 prices fell $2 to $63 a barrel (very good for mortgage rates, because higher energy prices play a large role in creating inflation)
- The yield on ten-year Treasuries reversed Thursday’s 2 basis point (2/100 of 1 percent) drop, bouncing back up to 2.76 percent. This is bad for mortgage rates because they tend to follow Treasuries
- CNNMoney’s Fear & Greed Index rose 2 points to a reading of 10 (out of a possible 100). That’s less afraid than last week, but still about as fearful it gets. Moving into a less fearful state is usually bad for rates. “Fearful” investors generally push bond prices up (and interest rates down) as they leave the stock market and move into bonds, while “greedy” investors do the opposite. However, if what investors ear most is inflation, look out.
This week’s reporting is pretty low-level until we get to Friday, the most important day of the month. We will update with analysts’ predictions as they come in.
- Monday: nothing
- Tuesday: nothing
- Wednesday: ADP Employment for March (previous month was 235,000 jobs added), Factory Orders for February (previous month was down 1.4 percent)
- Thursday: Weekly Unemployment Claims (previous week saw 235,000 claims)
- Friday: March Non-farm payrolls (previous month was 313,000), March Unemployment Rate (previous month was 4.1 percent), and Average Hourly Earnings (previous month’s increased by .1 percent)
Rate lock recommendation
There appears to be little pressure on current mortgage rates. And there will be no scheduled economic releases expected to push them in the next few days. If you can almost qualify for a shorter lock (say you are 17 days from closing and could save .125 percent by locking for 15 days instead of 30), it’s probably safe to wait a couple of days.
In general, pricing for a 30-day lock is the standard most lenders will (should) quote you. The 15-day option should get you a discount, and locks over 30 days usually cost more.
In a rising rate environment, the decision to lock or float becomes complicated. Obviously, if you know rates are rising, you want to lock in as soon as possible. However, the longer you lock, the higher your upfront costs. If you are weeks away from closing on your mortgage, that’s something to consider. On the flip side, if a higher rate would wipe out your mortgage approval, you’ll probably want to lock in even if it costs more.
If you’re still floating, stay in close contact with your lender, and keep an eye on markets.
- 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 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 (Jan 18th, 2019)