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Mortgage rates today, August 8, 2018, plus lock recommendations

Gina PogolThe Mortgage Reports Contributor

What’s driving current mortgage rates?

Mortgage rates today are higher (except, notably, the 15-year products). We have no major economic releases to work with this morning, but there will be a significant Treasury auction of 10-year Notes that could change interest rates this afternoon.

We’ll get the results at 1 pm EDT, and if demand for US Notes is high, bond prices will likely increase and rates will drop. The opposite, however, is also true — lukewarm demand could push bonds down and current mortgage rates up.

Rates Below Are Averages. Get Your Personalized Rates Here. (Aug 21st, 2018)
Program Rate APR* Change
Conventional 30 yr Fixed 4.792 4.803 +0.04%
Conventional 15 yr Fixed 4.413 4.433 Unchanged
Conventional 5 yr ARM 4.313 4.796 +0.02%
30 year fixed FHA 4.5 5.508 +0.04%
15 year fixed FHA 3.75 4.701 Unchanged
5 year ARM FHA 4.188 5.327 Unchanged
30 year fixed VA 4.625 4.82 +0.04%
15 year fixed VA 3.75 4.063 Unchanged
5 year ARM VA 4.25 4.545 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

Indicators this morning are mostly favorable for interest rates (especially the oil pricing).

  • Major stock indexes opened mixed but flat (neutral for mortgage rates)
  • Gold prices increased by $1 to $1,218 an ounce. (That is slightly good for 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 $67 a barrel (very good for mortgage rates today, because energy prices play a large role in creating inflation)
  • The yield on ten-year Treasuries did not move, remaining at 2.97 percent. That is neutral for mortgage borrowers because mortgage rates tend to follow Treasuries
  • CNNMoney’s Fear & Greed Index rose 3 points to a reading of 72 (out of a possible 100). That is bad news for interest rates because the index moved into a “greedier” state. Normally, “greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite
Verify your new rate (Aug 21st, 2018)

Rate lock recommendation

If I absolutely needed a certain rate to qualify for my mortgage, and that rate was available today, I’d probably lock it. Otherwise, I’d be inclined to float. And that’s especially true if my lender charged a big upfront fee to lock in over 30 days.

In general, pricing for a 30-day lock is the standard most lenders will (should) quote you. The 15-day or 7-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. 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. (Aug 21st, 2018)

This week

This week is light on economic reporting and expected to be fairly uneventful.

  • Monday: Nothing
  • Tuesday: Nothing
  • Wednesday: Treasury auction of 10-year Notes  (good demand = higher prices and lower rates, and the opposite is also true)
  • Thursday: Weekly Jobless Claims (not very important but more unemployment is better for rates, less is worse) and Treasury auction of 30-year Notes (good demand = higher prices and lower rates, and the opposite is also true), Producer Price Index (PPI) (higher than the .3 percent expected increase could cause rates to rise)
  • Friday: The most important, Consumer Price Index, measures inflation at the consumer level of the economy. Analysts predict a 0.2 percent increase. Lower numbers would be good for rates; higher would be bad because that would signal inflation.

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)