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Mortgage rates today, June 22, 2018, plus lock recommendations

Gina PogolThe Mortgage Reports Contributor

What’s driving current mortgage rates?

Most mortgage rates today are unchanged so far. This week was really thin on financial reporting, and today, we got nothin’. This means mortgage borrowers will need to look at the economic data below, commentary from government agencies and, of course, Twitter.

Rates Below Are Averages. Get Your Personalized Rates Here. (Sep 21st, 2018)
Program Rate APR* Change
Conventional 30 yr Fixed 4.75 4.761 Unchanged
Conventional 15 yr Fixed 4.333 4.353 Unchanged
Conventional 5 yr ARM 4.313 4.753 Unchanged
30 year fixed FHA 4.458 5.465 Unchanged
15 year fixed FHA 3.75 4.701 Unchanged
5 year ARM FHA 4.188 5.255 Unchanged
30 year fixed VA 4.542 4.736 Unchanged
15 year fixed VA 3.75 4.063 Unchanged
5 year ARM VA 4.25 4.468 Unchanged

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 neutral-to-bad for mortgage rates. The good news is that OPEC has agreed to produce more oil, Bad news is that oil is at $67 a barrel today.

  • Major stock indexes are mixed but slightly up overall (slightly bad for mortgage rates)
  • Gold prices rose $3 to $1,271 an ounce. (That is slightly 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 rose $2 to $67 a barrel (that’s bad for mortgage rates because energy prices play a large role in creating inflation)
  • The yield on ten-year Treasuries remains at 2.90 percent. That is neutral for mortgage rates because mortgage rates tend to follow Treasuries
  • CNNMoney’s Fear & Greed Index rose 1 point to 55 (out of a possible 100). That is a less fearful direction,  but we are in the “neutral” range. That’s slightly worse for rates.  “Fearful” investors 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 (Sep 21st, 2018)

Next week

Next week offers a few pertinent economic releases in addition to a couple of Treasury auctions. Most of the releases we get won’t be of major importance. The trade war news and overseas response will likely drive rates more than these reports.

  • Monday: New Home Sales report for May (forecast: 667,000 sales)
  • Tuesday: April Case-Shiller Home Price Index  Consumer Convenience Index for June (forecast: 128)
  • Wednesday: May Durable Goods Orders (forecast: -1.4%), Pending Home Sales for May
  • Thursday: Weekly Jobless Claims (previous: 218,000)
  • Friday: Personal Income, Consumer Spending, and Core Inflation for May, (forecast: increase by .4%, .4% and .2%, respectively), Consumer Sentiment for June (forecast: 99.3)

Rate lock recommendation

Rates are trending higher over the long-term, but we have been seeing some dips. Today’s economic indicators do not indicate much movement in rates, but global financial and political events could still cause changes.

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. I recommend:

  • 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
Lock in your rate. Start here. (Sep 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 (Sep 21st, 2018)