What’s driving current mortgage rates?
Average mortgage rates today have barely moved since Friday’s opening. Probably because trading volume is light (investors take vacations, too), no important reports have been issued, and the economic data have pretty much canceled each other out. Today’s opening data does look worse for rates, however.
We have no scheduled economic reporting today, and will once again rely on financial figures like those listed below the rate table. And global economic and political events can jerk current mortgage rates around like a wayward Labrador on a loose leash.
It’s no secret that interest rates have been trending higher, despite occasional drops. According to a survey by the Federal Reserve Bank of New York, U.S. tariffs have increased costs for domestic manufacturers, and many manufacturers indicate that they will to pass increases on to customers. What causes rates to rise? Inflation.
Stay tuned.Rates Below Are Averages. Get Your Personalized Rates Here. (Dec 8th, 2019)
|Conventional 30 yr Fixed||4.75||4.761||Unchanged|
|Conventional 15 yr Fixed||4.25||4.269||Unchanged|
|Conventional 5 yr ARM||4.25||4.761||Unchanged|
|30 year fixed FHA||4.417||5.423||Unchanged|
|15 year fixed FHA||3.625||4.575||Unchanged|
|5 year ARM FHA||3.875||5.208||-0.02%|
|30 year fixed VA||4.5||4.694||Unchanged|
|15 year fixed VA||3.75||4.063||Unchanged|
|5 year ARM VA||4.0||4.459||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 mostly unfavorable for mortgage rates, especially stocks, Treasuries, and oil.
- Major stock indexes opened higher ( bad for mortgage rates)
- Gold prices rose $6 (for the second straight day) to $1,198 an ounce. (That is good news 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 (bad for today’s mortgage rates, because energy prices play a large role in creating inflation)
- The yield on ten-year Treasuries increased 1 basis point (1/100th of 1 percent) to 2.85 percent. That is bad news for mortgage borrowers because mortgage rates tend to follow Treasuries
- CNNMoney’s Fear & Greed Index spiked 7 points (after rising 8 points yesterday) to a reading of 64 (out of a possible 100). That is in the “greedy” range and is bad for interest rates. 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
Rate lock recommendation
If I had a loan in process, I’d be inclined to lock. Unless by floating a day or two, I could get a better deal (15-day instead of 30-day, for instance) by doing so. But locking in today is also a good decision because today’s mortgage rates are so favorable.
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 of about .125 percent, 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
This week is pretty light on data but heavy on information and opinions from the Fed. That can rock the boat if they come up with anything surprising. Anything indicating increased consumer activity or confidence is bad for mortgage interest rates. The reverse is also true. And when actual figures exceed analysts’ expectations, rates can increase. When actual numbers fall short, mortgage rates often fall.
- Monday: Nothing
- Tuesday: Nothing
- Wednesday: Existing Home Sales from the National Association of Realtors for July (5.4 million expected), FOMC Minutes from the Fed (Noted from the conclusion of this month’s meeting)
- Thursday: Weekly Jobless Claims (215k predicted) and New Home Sales for July from the Commerce Department (641,000 predicted)
- Friday: Durable Goods Orders (expected to drop .9 percent), and a speech from Fed Chair Jerome Powell
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 (Dec 8th, 2019)
Mortgage rate methodology
The Mortgage Reports receives rates based on certain criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.