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Mortgage rates today, June 3, 2019, plus lock recommendations

Peter Warden
The Mortgage Reports editor

What’s driving current mortgage rates?

Average mortgage rates tumbled again on Friday, as we predicted. They’re now at their lowest level since the opening weeks of 2018. And, if you’re a creditworthy borrower, there’s a good chance you’ll be offered a mortgage rate that begins with a 3. You may well wish to consider locking in that great deal now, thus securing your gains. But it’s far from clear that further falls aren’t to come.

We may well have been due a bounce in rates at the end of last week. But then President Trump launched the opening salvo in a potential trade war with Mexico. And that spooked markets, triggering Friday’s fall. How long the inevitable bounce will be delayed may largely depend on how various trade disputes play out in coming days and weeks. But, judging from the performance of markets first thing this morning, it probably won’t be today

Because the data below the rate table are indicative of mortgage rates falling yet again today, though probably not as sharply as on Friday. But, as always, that prediction may be overtaken by events.

» MORE: Check Today’s Rates from Top Lenders (June 3, 2019)

Program Rate APR* Change
Conventional 30 yr Fixed 3.938 3.938 Unchanged
Conventional 15 yr Fixed 3.563 3.563 Unchanged
Conventional 5 yr ARM 3.75 4.463 Unchanged
30 year fixed FHA 3.375 4.36 -0.06%
15 year fixed FHA 3.438 4.386 -0.06%
5 year ARM FHA 3.375 4.944 -0.02%
30 year fixed VA 3.563 3.735 Unchanged
15 year fixed VA 3.563 3.874 Unchanged
5 year ARM VA 3.563 4.229 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

First thing this morning, markets looked set to deliver mortgage rates that are lower today. By approaching 10:00 a.m. (ET), the data, compared with this time on Friday, were:

  • Major stock indexes were mixed soon after opening (neutral for mortgage rates). When investors are buying shares they’re often selling bonds, which pushes prices of Treasuries down and increases yields and mortgage rates. The opposite happens on days when indexes fall. See below for a detailed explanation
  • Gold prices rose to $1,321 from $1,303 an ounce. (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 inched down to $54 from $55 a barrel (good for mortgage rates, because energy prices play a large role in creating inflation)
  • The yield on 10-year Treasuries moved down to 2.10 percent from 2.17 percent. (Good for borrowers). More than any other market, mortgage rates tend to follow these particular Treasury yields
  •  CNNMoney’s Fear & Greed Index fell to 21 from 23 out of a possible 100. It was up at 60 this time last month. (Good for borrowers “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. So lower readings are better than higher ones

If nothing changes in coming hours, today might be another good day for mortgage rates.

Verify your new rate (June 3, 2019)

Today’s drivers of change

Trade disputes

The US-China trade dispute may be escalating, but the President is opening a fresh front. Late Thursday, he unveiled new tariffs on goods imported from Mexico, triggering Friday’s falls in many markets — and in mortgage rates. Those tariffs should start at 5 percent from June 10 and could then “gradually increase,” ratcheting up to 25 percent by October. Meanwhile, Politico reported last Tuesday:

European Commissioner for Trade Cecilia Malmström warned the EU’s [European Union — the world’s largest trading bloc] trade ministers at a meeting on Monday that they need to steel themselves for U.S. President Donald Trump to hit billions of euros worth of European goods with tariffs, ramping up a decadeslong dispute over unwarranted subsidies for Airbus.

This morning, Investopedia put the threat posed by trade disputes into context:

May was a bad month for global investors who experienced $4 trillion in losses as stocks tumbled amid intensifying global trade tensions. But those losses may be just a sign of further damage to come, as U.S. President Donald Trump threatened to impose new tariffs on imports from Mexico late last week, and some Wall Street analysts see the U.S.-China trade war lasting for decades, according to Bloomberg.

Markets hate trade disputes because they introduce uncertainty, dampen trade and are disruptive to established supply chains. Some fear a trade war on three fronts might be a drag on the global economy that hits America especially hard. And that fear, in turn, is likely to exert downward pressure on mortgage rates. That’s not to say they won’t sometimes move up in response to other factors. But, absent a resolution, such trade wars may well set a new direction that eventually emerges as a downward trend. However, any reduction in China’s buying of American government debt would likely have the opposite effect.

Inverted yield curve

You may have read about the inversion of the bond yield curve in April. And you may understandably have chosen to skip over that bit. But it’s back. And it might be important.

The jargon hides a simple phenomenon: Yields on short-term U.S. Treasury bonds are currently higher than those for long-term ones. So at one point last week, you could get a yield of 2.35 percent on a 30-day Treasury bill but 2.22 percent on a 10-year one. And that’s highly unusual. Normally, you get a higher return the longer you’re locked into an investment.

The problem is, inverted bond yields have come to be seen as harbingers of economic gloom. When we last reported on this in April, we quoted CNBC:

The U.S. Treasury yield curve has inverted before each recession in the past 50 years and has only offered a false signal just once [in 1998] in that time, according to data from Reuters.

However, last Thursday, Wells Fargo Securities’ Michael Schumacher told CNBC, “… we think it’s not really a recession predictor at this point.” So it’s too soon to panic. But some are getting the jitters.

Treasuries and mortgage rates

You may remember that we recently stole a simile from Mortgage News Daily. Mortgage rates are like dogs while yields on 10-year Treasury bonds are like their owners. Mostly, mortgage rates trot happily along on their leashes at their human’s heels. But sometimes they run ahead, dragging the owner along. And at other times they sit stubbornly and have to be dragged along.

Recently, they’ve been sitting a lot. If they’d been keeping up with those Treasury yields, rates would be even lower than they currently are. And that’s been applying especially noticeably over the last few days.

Those yields are one of the main indicators we use to make predictions about where rates will head. And, with that tool less reliable than usual, we sometimes struggle to get those predictions right. Until the relationship between rates and yields gets back in synch, you should bear that in mind.

Rate lock recommendation

Trends

Trends are impossible to discern from just a few days’ changes. So don’t read too much into recent fluctuations. Frustrating though it is, there really is no way of knowing immediately what movements over a brief period mean in their wider context.

Even when one’s discernable, trends in markets never last forever. And, even within a long-term one, there will be ups and downs. Eventually, at some point, enough investors decide to cut losses or take profits to form a critical mass. And then they’ll buy or sell in ways that end that trend. That’s going to happen with mortgage rates. Nobody knows when or how sharply a trend will reverse. But it will. That might not be wildly helpful but you need to bear it in mind. Floating always comes with some risk.

Of course, it’s possible the Federal Reserve’s March statement on rates has established a long-term downward trend. But you can still expect to see rises and falls (such as those over the last several weeks) within it as other risk factors emerge and recede. And, depending on how near you are to your closing date, you may not have time to ride out any increases.

We suggest

That latest Fed announcement on interest rates didn’t move policy on from that declared after March’s meeting. That was doveish and ruled out further rate hikes this year. But it will likely continue to add some downward pressure on mortgage rates in coming months. As we’ve seen in recent weeks, that doesn’t mean there aren’t other risks (currently known and unknown) that could see them rise, possibly sharply. We suggest that you lock if you’re less than 30 days from closing.

Of course, financially conservative borrowers might want to lock immediately, almost regardless of when they’re due to close. On the other hand, risk takers might prefer to bide their time. Only you can decide on the level of risk with which you’re personally comfortable.

If you are still floating, do remain vigilant right up until you lock. Continue to watch key markets and news cycles closely. In particular, look out for stories that might affect the performance of the American economy. As a very general rule, good news tends to push mortgage rates up, while bad drags them down.

When to lock anyway

You may wish to lock your loan anyway if you are buying a home and have a higher debt-to-income ratio than most. Indeed, you should be more inclined to lock because any rises in rates could kill your mortgage approval. If you’re refinancing, that’s less critical and you may be able to gamble and float.

If your closing is weeks or months away, 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. 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

» MORE: Show Me Today’s Rates (June 3, 2019)

This week

At last, we have a meaty week for economic reports. Friday is the most important day. Because that’s when the official employment situation report is published. But other data earlier in the week also sometimes move markets.

The Federal Reserve is holding a two-day policy conference in Chicago on Tuesday and Wednesday. Some are now hoping the Fed will rescue falling markets by cutting interest rates. So investors will be closely watching that.

However, how much notice markets take of the economy and the Fed will depend on how spooked they are by more scary threats to global trade. It may take a lot to distract them from those.

Forecasts matter

Markets tend to price in analysts’ consensus forecasts (below, we mostly use those reported by MarketWatch) in advance of the publication of reports. So it’s usually the difference between the actual reported numbers and the forecast that has the greatest effect. That means even an extreme difference between actuals for the previous reporting period and this one can have little immediate impact, providing that difference is expected and has been factored in ahead. Although there are exceptions, you can usually expect downward pressure on mortgage rates from worse-than-expected figures and upward on better ones. However, for most reports, much of the time, that pressure may be imperceptible or barely perceptible.

  • Monday: May purchasing managers’ index (PMI) for manufacturing from Markit (actual 50.5 points — its lowest since Aug. 2009); Institute of Supply Management (ISM) manufacturing index for May (actual 52.1 percent; forecast 53.3 percent). Also, April construction spending (actual unchanged; forecast +0.5 percent)
  • Tuesday: April factory orders (forecast -0.9 percent)
  • Wednesday: All for May: employment numbers from ADP; services PMI from Markit; ISM nonmanufacturing index (forecast 56.0 percent)
  • Thursday: Q1 April trade deficit (forecast $50.1 billion). Also revised estimates for the first quarter for productivity (forecast +3.5 percent) and unit labor costs (forecast -0.8 percent)
  • Friday: May employment situation report, including nonfarm payrolls (forecast +174,000 new jobs); unemployment rate (forecast 3.6 percent); and average hourly earnings (forecast +0.3 percent)

The last half of the week is the more important, with Friday the key day.

What causes rates to rise and fall?

Mortgage interest rates depend 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 5 percent interest ($50) each year. (This is called its “coupon rate” or “par rate” because you paid $1,000 for a $1,000 bond, and because its interest rate equals the rate stated on the bond — in this case, 5 percent).

  • Your interest rate: $50 annual interest / $1,000 = 5.0%

When rates fall

That’s a pretty good rate today, so lots of investors want to buy it from you. You can sell your $1,000 bond for $1,200. The buyer gets the same $50 a year in interest that you were getting. It’s still 5 percent of the $1,000 coupon. However, because he paid more for the bond, his return is lower.

  • 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.

Show Me Today’s Rates (June 3, 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.