What’s driving current mortgage rates?
Average mortgage rates today are virtually unchanged since Friday’s opening. The only scheduled report we received today is a good one for interest rates. Retail Sales for September (0.6 percent increase predicted) underperformed drastically, coming in with just a .1 percent rise. That means less spending, less inflation.
|Conventional 30 yr Fixed||5.0||5.011||Unchanged|
|Conventional 15 yr Fixed||4.583||4.603||Unchanged|
|Conventional 5 yr ARM||4.563||4.969||Unchanged|
|30 year fixed FHA||4.792||5.802||Unchanged|
|15 year fixed FHA||3.938||4.89||+0.06%|
|5 year ARM FHA||4.0||5.384||-0.1%|
|30 year fixed VA||4.833||5.031||Unchanged|
|15 year fixed VA||4.125||4.441||Unchanged|
|5 year ARM VA||4.438||4.755||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
This economy this morning is mixed and neutral except for gold price increases, which favor interest rates.
- Major stock indexes opened mixed but flat (neutral for rates)
- Gold prices rose another $9 to $1,232 an ounce, continuing a higher trend. (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 remained at $71 a barrel (neutral for rates because energy prices play a large role in creating inflation)
- The yield on ten-year Treasuries remains at 3.16 percent. That’s neutral for borrowers because mortgage rates tend to follow Treasuries
- CNNMoney’s Fear & Greed Index in still at 10 (out of a possible 100). That score is still in the “extreme fear” range, good for rates. To get this in perspective, a month ago the index was at 73 (“extreme greed”). “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
Mortgage rates have been rising overall for some time. But recently, they have dropped into a more favorable territory, good news if you are closing soon. This may be one of those blips that allow you to get a better deal than you expected. If you need another day or two to drop into a better-priced tier, say from 1 30-day lock to a 15-day lock, you can probably safely wait a day or two. The news here is pretty neutral and this week’s reports are not that important.
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 your 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
- FLOAT if closing in 30 days
- FLOAT if closing in 45 days
- FLOAT if closing in 60 days
This week is likely to be less driven by scheduled economic reports following last week’s bombshell of the monthly Employment Situation report. But there is always politics to throw monkey wrenches in our best-laid plans. Stay in contact with your lender and keep one eye on the markets if closing soon.
- Monday: Retail Sales for September (0.6 percent increase predicted)
- Tuesday: Capacity Utilization for September (predicted: 78.2 percent), Industrial Production for September (predicted 0.2 percent increase), and October’s NAHB housing market index (predicted: 67)
- Wednesday: Housing Starts for September (1.220 m predicted), FOMC minutes from the Fed
- Thursday: Weekly Jobless Claims (predicted: 212,000)
- Friday: Existing home sales (predicted: 5.30m)
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)
Mortgage rate methodology
The Mortgage Reports receives rates based on selected 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.