Curve

Mortgage rates today, June 13, 2018, plus lock recommendations

Gina PogolThe Mortgage Reports Contributor

What’s driving current mortgage rates?

Most mortgage rates today are little changed, probably because investors and lenders are waiting for an interest rate announcement from the Fed this afternoon. Everyone expects that short-term rates will go up by .25 percent. Any deviations from this could cause a major change in current mortgage rates. We will cover the Fed’s announcement later today.

The only report today is the Producer Price Index, which tracks inflation at the wholesale level. It increased by .5 percent, beating last month’s .1 percent increase, and more importantly, beating forecasts of .3 percent. This is inflationary and bad for interest rates.

Rates Below Are Averages. Get Your Personalized Rates Here. (Aug 21st, 2018)
Program Rate APR* Change
Conventional 30 yr Fixed 4.792 4.803 Unchanged
Conventional 15 yr Fixed 4.333 4.353 Unchanged
Conventional 5 yr ARM 4.313 4.721 Unchanged
30 year fixed FHA 4.542 5.549 Unchanged
15 year fixed FHA 3.75 4.701 Unchanged
5 year ARM FHA 4.188 5.17 Unchanged
30 year fixed VA 4.625 4.82 Unchanged
15 year fixed VA 3.813 4.126 -0.06%
5 year ARM VA 4.25 4.378 +0.09%

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

Financial data affecting today’s mortgage rates

Today’s data are mostly neutral or slightly bad for mortgage rates.

  • Major stock indexes are up very slightly (slightly bad for mortgage rates)
  • Gold prices dropped $2 to $1,300 an ounce. (That is slightly bad 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 remained at $66 a barrel (that’s neutral for rates because energy prices play a large role in creating inflation.)
  • The yield on ten-year Treasuries fell one basis point (1/100 of 1 percent) to 2.96 percent. That is good for mortgage rates because mortgage rates tend to follow Treasuries.
  • CNNMoney’s Fear & Greed Index stayed at 65 (out of a possible 100). That is unchanged and neutral, but we’re firmly in the “greedy” range. “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.
Verify your new rate (Aug 21st, 2018)

This week

This week has some moderately-important reporting, with the biggest day being Friday. Borrowers and lenders will also look for interest rate clues in global political news and White House tweets. Only reports that vary significantly from expectations will likely affect rates.

  • Monday: April Factory Orders (forecast: -.6 percent)
  • Tuesday: Consumer Price Index and Core CPI
  • Wednesday: Producer Price Index (previous: .1 percent increase)
  • Thursday: Weekly Jobless Claims (previous: 222,000 claims) and Retail Sales (previous: up .3 percent)
  • Friday: Consumer Sentiment (previous: 98), probably the most important report of the week

Rate lock recommendation

Rates are trending higher despite some occasional dips. Overall, it’s better to take a defensive position when locking rather than floating and hoping — unless you are trying to refinance and have a target rate you need to hit to make it worthwhile. If rates are increasing and you are closing soon, nail down something good while you can get it.

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. If you can get a better rate (say, a .125 percent lower rate) by waiting a couple of days to get a 15-day lock instead of a 30, it’s probably safe to consider.

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
  • LOCK if closing in 45 days
  • LOCK if closing in 60 days
Lock in your rate. Start here. (Aug 21st, 2018)

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)