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Mortgage rates today, July 12, 2019, plus lock recommendations

Peter Warden
The Mortgage Reports editor

What’s driving mortgage rates today?

Average mortgage rates rose yesterday, as we predicted. However, the increase was sharper than we expected. It wasn’t huge (equal-third biggest movement over the last month) but it took those rates back to their highest level since June 19. Still, let’s keep this in context: we remain in a period of ultra-low rates.

There’s little scheduled on today’s calendar that might move mortgage rates far. So any movement is likely to arise from markets continuing to digest Federal Reserve Chair Jerome Powell’s recent Capitol Hill testimony, or from their responding to relevant news items. A sudden shift in investor sentiment could similarly trigger changes.

The data below the table are indicative of mortgage rates today rising gently or holding steady. However, as always, events might yet overtake that prediction.

Program Rate APR* Change
Conventional 30 yr Fixed 4 4 +0.06%
Conventional 15 yr Fixed 3.5 3.5 Unchanged
Conventional 5 yr ARM 4.188 4.399 +0.02%
30 year fixed FHA 3.5 4.486 +0.13%
15 year fixed FHA 3.375 4.324 Unchanged
5 year ARM FHA 3.688 4.867 Unchanged
30 year fixed VA 3.563 3.735 Unchanged
15 year fixed VA 3.5 3.811 -0.06%
5 year ARM VA 3.75 4.087 -0.02%
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

» MORE: Check Today’s Rates from Top Lenders (July 12, 2019)

Financial data affecting today’s mortgage rates

First thing this morning, markets looked set to deliver mortgage rates today that are a little higher or perhaps unchanged. By approaching 10:00 a.m. (ET), the data, compared with this time yesterday, were:

  • Major stock indexes were nearly all higher soon after opening (bad 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 edged down to $1,410 an ounce from $1,417. (Bad 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 $60 a barrel from $61 (good for mortgage rates, because energy prices play a large role in creating inflation)
  • The yield on 10-year Treasuries rose to 2.13% from 2.09% (bad for borrowers). More than any other market, mortgage rates tend to follow these particular Treasury yields
  •  CNNMoney’s Fear & Greed Index increased to 65 from 61 out of a possible 100 points. (Bad 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

It might be a quiet day for mortgage rates.


Verify your new rate (July 12, 2019)

Today’s drivers of change

Federal Reserve

Two important Fed-related events happened on Wednesday. First, Chair Jerome Powell began a two-day stint testifying on Capitol Hill, which continued yesterday. And, secondly, we saw the publication of the minutes of the last meeting of the Federal Open Market Committee (FOMC). That’s the Fed body that determines that organization’s interest rates — and therefore many others. So investors always study those meeting minutes in great detail, hoping to uncover a hint over future moves.

In both events, the Fed bent over backward to please markets — and the President, who’s been exerting political pressure on the organization to be more dovish (or less economically responsible, in some observers’ view). Normally, you’d have expected a sharp reaction from markets to all that love. But, in the event, many barely budged on Wednesday.

Why was that? Well, to justify that dovishness, the Fed had to talk up economic “uncertainties,” which is a toxic word to markets. And Thursday morning’s Financial Times noted, “Some investors warn that too much stimulus could distort financial markets.” Meanwhile, yesterday morning’s New York Times spoke of markets’ reactions to Powell’s “comments that trade tensions and global economic issues continue to weigh on the United States economy.”

Powell tried to be a little more reassuring in his second day of testimony yesterday. He declared that the US economy is in a “very good place” and that the Fed was ready to do everything possible to “keep it there.” That reassurance (along with warmer inflation figures) may have played a part in yesterday’s bigger-than-expected mortgage rate rises.

Trade disputes

The US-China trade dispute is still very much alive in spite of recent events. At the end of last month, Presidents Donald Trump and Xi Jinping met in Osaka, Japan during the G20 summit. And, as a result, bilateral trade talks are beginning again this week and America has held off on the implementation of planned new tariffs. But existing tariffs (and resentments and disagreements) remain in place.

So far, markets have appeared skeptical about how much difference the Osaka meeting will ultimately make. Many observers question whether the resumed talks can make much progress.

US vs. EU

Meanwhile, the possibility of a second front in the trade wars remains real. And there are increasing rumblings of possible escalations in the US-European Union (EU) trade dispute. Last week, the U.S. proposed more tariffs on EU goods, though those are yet to be implemented.

More recently, the US has threatened to introduce tariffs against France, which is an EU member state. This is in response to a tax France will shortly implement on revenues generated by global digital companies within its national borders. This is to counter artificial tax-efficiency measures that some such firms can use to reduce their profits (and so tax liabilities) in local markets. Making the companies pay a low rate (3% in France’s case) on revenues rather than profits goes some way to undermine those measures.

On Wednesday, US trade representative Robert Lighthizer made a statement: “The president has directed that we investigate the effects of this legislation and determine whether it is discriminatory or unreasonable and burdens or restricts United States commerce.”According to Fortune:

Tech industry lobbyists applauded the opening of the probe, with the Computer & Communications Industry Association (CCIA)—whose members include the likes of Facebook, Amazon and Google—calling it “a critical step toward preventing protectionist taxes on global trade.”

On Thursday, the French legislature passed the Act anyway. And some other EU countries (including the UK) are planning similar moves.

The EU is the biggest trading bloc in the world and an all-out trade war would be a clash of Titans that could cause real harm to the global economy  — as well as the economies of both participants.

How disputes hurt

Markets hate trade disputes because they introduce uncertainty, dampen trade, slow global growth and are disruptive to established supply chains. The President is confident that analysis is wrong and that America will come out a winner. However, some fear a trade war — possibly on two fronts — might be a drag on the global economy that hits America especially hard. And that fear, in turn, is likely to exert long-term 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 see the current downward trend in mortgage rates continuing.

Are markets bottoming out?

Since the middle of last November, the graph of average mortgage rates shows them falling with amazing consistency. Only occasionally and relatively briefly have they risen.

Some experts are now warning that those rates are unlikely to go much lower — at least, absent something disastrous happening that pushes them beyond established ranges. Such bad news remains a possibility. Currently, there are tensions in the Middle East that could rapidly turn into a shooting war involving the United States. Trade disputes might become yet more widespread and toxic, ultimately triggering a global recession. And, of course, events may quickly arise that are currently on nobody’s radar.

But, without such an external stimulus, those experts reckon rates are unlikely to fall much further. And, of course, there’s scope for good economic news that could see them rise, possibly sharply. Not everyone agrees with this analysis: Read Could we see 2% mortgage rates before this is all over?

Meanwhile, the deals that are available for you to lock in are now excellent by all but the most extreme standards. That’s why we still suggest locking your rate if you’re less than 30 days from closing. In this writer’s personal assessment, the potential gains you stand to make by floating are outweighed by the possible losses. But, as we say below on a daily basis, “Only you can decide on the level of risk with which you’re personally comfortable.”

Treasuries and mortgage rates

We liked a Mortgage News Daily simile so much we stole it. 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 occasionally 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. Why the gap? Apparently, investors are concerned they’re not being rewarded sufficiently for the extra risk they shoulder when they buy mortgage-backed securities rather than Treasury bonds. And some are worried about the possibility of the government reforming Fannie Mae and Freddie Mac.

Those Treasury yields are one of the main indicators we use to make predictions about where rates will head. And, with that tool unreliable than usual, we sometimes struggle to get our daily 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 short-term 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 discernible, 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.

Short- and long-term differences

Of course, it’s possible the Federal Reserve’s doveish March policy statement on rates, which seems to have been largely confirmed in mid-June, 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.

Experts differ over what may come next. And so much is unpredictable that your gut feel may have roughly the same chance of being proved right as their more informed views. Just don’t forget that you’re gambling with the mortgage rate you’re probably going to be paying for a very long time.

We suggest

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. After all, current mortgage rates remain exceptionally low and a great deal is assured. On the other hand, risk takers might prefer to bide their time and take a chance on further falls. 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 (July 12, 2019)

This week

There were three main scheduled events this week that could have triggered large rises or falls in mortgage rates. Wednesday and Thursday saw two of them and both those concerned the Federal Reserve.  Read about what happened under “Today’s drivers of change” (above).

Yesterday’s release of inflation data was the third of this week’s economic events that had the potential to send mortgage rates soaring or tumbling. Although the numbers were very close to forecasts, they were sufficiently different to send Treasury yields (and probably mortgage rates) up a little.

Of course, any day can carry risk. Because any news story that can affect the American or global economies has the potential to move markets — and mortgage rates. And any economic report can trigger similar changes if it contains sufficiently shocking information.

Forecasts matter

Markets tend to price in analysts’ consensus forecasts (below, we mostly use those reported by MarketWatch, Moody’s Analytics or Bain Mortgage) 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: Nothing
  • Tuesday: May job openings (actual 7.3 million vacancies; no forecast). The NFIB Small Business Optimism Index slipped slightly amid rising uncertainty
  • Wednesday: Publication of FOMC minutes at 2:00 p.m. (ET). Also, Fed Chair Jerome Powell testifies this morning on Capitol Hill
  • Thursday: June consumer price index (CPI) (actual +0.1%; forecast unchanged: 0.0%) and core CPI (actual +0.2%; forecast +0.2%)
  • Friday: June producer price index (actual +0.1%; forecast unchanged: 0.0%)

It’s a quiet week for economic reporting. But the Fed events and CPI figures have made it a moderately important one.

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% 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%).

  • 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% 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%. 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 7%. Interest rates and yields are not mysterious. You calculate them with simple math.

Show Me Today’s Rates (July 12, 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.