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Mortgage rates today, December 9, 2019, plus lock recommendations

Peter Warden
The Mortgage Reports editor

Forecast plus what’s driving mortgage rates today

Average mortgage rates rose on Friday, as we predicted. Luckily, they only edged up, as the early threat of a significant increase dissipated. You now have to go back to Nov. 13 to find a higher rate. But there’s a brighter side. Strong employment reports such as Friday’s typically push rates much higher. So maybe markets are currently limiting the heights they’re prepared to reach.

There’s nothing on the economic calendar today. And markets are mostly subdued. But what changes there are seem to be friendly toward rates.

So, for now, mortgage rates today look likely to inch downward or hold steady. But, as always, events might overtake that forecast.

Program Rate APR* Change
Conventional 30 yr Fixed 3.875 3.875 Unchanged
Conventional 15 yr Fixed 3.458 3.458 Unchanged
Conventional 5 yr ARM 4.25 4.212 -0.04%
30 year fixed FHA 3.292 4.276 Unchanged
15 year fixed FHA 3.25 4.198 Unchanged
5 year ARM FHA 3.375 4.48 Unchanged
30 year fixed VA 3.375 3.558 Unchanged
15 year fixed VA 3.25 3.58 Unchanged
5 year ARM VA 3.417 3.7 Unchanged
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 (December 9, 2019)

About the Daily Rate Update

Market data affecting today’s mortgage rates

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

  • Major stock indexes were mixed and barely moving. (Neutral for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of Treasurys down and increases yields and mortgage rates. The opposite happens on days when indexes fall. See below for a detailed explanation
  • Gold prices edged up to $1,467 an ounce from $1,464. (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 $59 a barrel from $60. (Good for mortgage rates, because energy prices play a large role in creating inflation)
  • The yield on 10-year Treasurys fell to 1.82% from 1.84%. (Good for mortgage rates.) More than any other market, mortgage rates tend to follow these particular Treasury bond yields
  •  CNN Business Fear & Greed index slipped to 69 from 70 (Friday evening reading) out of a possible 100 points. (Good for mortgage rates.) “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

Today might be a quiet or slightly better day for mortgage rates.


Verify your new rate (December 9, 2019)

This week

Economic reports this week

There are two economic reports with the potential to move markets due for publication this week. The first is Wednesday’s consumer price index (CPI) and core CPI, which is the main index with energy and food prices stripped out. Those tend to be volatile, so some see the core CPI as a better guide to underlying trends.

The second important report is the one on Friday for retail sales. This also comes with a version that excludes a particularly volatile category: retail sales excluding autos.

But there’s another event this week that could disrupt markets. And that’s a two-day meeting of the Federal Open Market Committee, which is the Federal Reserve’s policy body that determines its (and therefore many other) interest rates. Watch out for its report and press conference on Wednesday afternoon. Pretty much nobody expects another rate cut that day. But markets will closely watch everything that’s written and said about future actions.

Of course, every economic report has the potential to make waves if it unexpectedly presents figures that are catastrophically terrible or exceptionally good.

»RELATED: Are Mortgage Rates Moving Higher in January 2019?

Forecasts matter

That’s because 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.

And 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.

This week’s calendar

Unusually, MarketWatch was late posting its forecasts. Assuming it rectifies that during the day, we’ll replace the following “TBA” (to be advised) placeholders with figures tomorrow.

  • Monday: Nothing
  • Tuesday: Revised productivity figures for the third quarter (forecast TBA)
  • Wednesday: November consumer price index (forecast TBA) and core consumer price index (forecast TBA). Plus Federal Reserve report and press conference in the afternoon
  • Thursday: November producer price index (forecast TBA)
  • Friday: November retail sales (forecast TBA) and retail sales excluding autos (forecast TBA). Plus UK general election result

So Wednesday and Friday are the most likely days for disruption caused by economic reports.

Events this week

But, as always, there are plenty of other sources of potential volatility. Right now, the unfolding drama of the US-China trade talks is the most obvious. But the possibility of a government shutdown on Dec. 20 may also begin to influence markets more. And, of course, there’s always a chance of some other issue — foreign or domestic — flaring up. Anything that might impact the US economy significantly is likely to affect markets.

Sunday, Dec. 15 is an important day for the US-China trade talks. That’s when the White House is scheduled to impose 15% tariffs on a further $156 billion worth of Chinese imports. If the two sides can reach an agreement over the so-called Phase-1 deal, those new tariffs could be abandoned, perhaps along with some others.

Neither side wants to reach the Sunday milestone. But can they, between now and then, find the common ground to avoid it? They’ll certainly try. And, if they succeed, expect mortgage rates to rise, probably steeply. The breaking off of talks could see an equally sharp fall.

Other days that could bring volatility include Friday, when the UK’s general election result will be known. Such elections often pass unnoticed by American markets, but this one’s tied to Brexit (see below), which could have an impact on our economy.

Today’s drivers of change

Trade

Most sharp movements in mortgage rates in recent months have been down to alternating optimism and pessimism over the US-China trade dispute. Indeed, that dispute has probably been the main driver of changes in most markets as they’ve moved in line with emerging and receding hopes of a resolution.

And there’s been a lot of emerging and receding going on over the last month. Just last week, we witnessed sunny optimism give way to somber pessimism, only for that, in turn, to fade.

Last Tuesday, President Donald Trump told reporters in London concerning the current talks:

I have no deadline. In some ways I think it’s better to wait for after the election, if you want to know the truth.

Now we face a fork in the road this Sunday (see above) at which a new range of tariffs is due to be introduced. Will we take the path that leads to a return to trade peace or will it be the one that sees escalation? Either way, we may see hope emerging and receding even more frequently this week.

Pain

Right now, many would welcome any signs of this trade dispute heading toward a resolution. A new round of American tariffs on Chinese goods became operative on Sept. 1. The Peterson Institute for International Economics reckoned that brought the average US tariff on imports from that country to 21.2%, up from 3.1% when President Trump was inaugurated. More tariffs were due to be imposed through the rest of this year. And those may yet be implemented if no deal is reached.

But this dispute has been causing some pain to both sides. China’s slipped to third place from first in the list of America’s trading partners. And it’s economy is certainly under strain.

Meanwhile, researchers from University College London and the London School of Economics calculate the average American family will pay about $460 a year in higher prices as a result of the tariffs implemented so far.

Higher prices

A later (September) study by the nonpartisan National Foundation for American Policy estimated, “the tariffs will cost the average household $2,031 per year, and will be recurring so long as the tariffs stay in effect.” That, the Foundation suggested, would rise to $3,614 a year if all the administration’s currently proposed tariffs were implemented. The White House would undoubtedly challenge all those figures.

But, on Dec. 2, New York Federal Reserve Bank researchers published a report that showed that American businesses and consumers were indeed bearing the brunt of the tariffs. They found Chinese import prices fell by only 2% between June 2018 and September 2019. And that means Americans were picking up the rest of the tab on tariffs as high as 25%.

Jobs at risk

As bad, on Nov. 22, Moody’s Analytics’ chief economist Mark Zandi published a report suggesting that the US economy had lost 300,000 jobs as a direct result of this trade dispute. Separately, he told CBS Moneywatch that “some 450,000 fewer jobs will be created by year-end” if current tariffs remain in place and new ones are implemented on schedule.

And on Dec. 3, the U.S. Solar Industries Association (not a disinterested party) said, “tariffs on imported [solar] panels will cost the United States 62,000 jobs and $19 billion,” according to Reuters. The White House (also not a disinterested party) disputed the figures.

Of course, unemployment is already at a near-record low. But it could be even lower (and perhaps wages better) absent the US-China dispute.

European Union next?

The president occasionally makes bellicose remarks about what he perceives to be an unfair trade imbalance between the US and the European Union. The EU is the world’s biggest trading bloc. But on Dec. 2, the US trade representative announced real plans to introduce tariffs on an EU member state.

The proposal would see those new tariffs levied at a rate of 100% on $2.4 billion of French goods, including Champagne, other wines, cheese and luxury goods. The move is in retaliation for France’s digital services tax. That is intended to raise revenues from technology companies, frustrating their use of artificial tax avoidance methods. But, of course, many of those companies are American, which is why the president sees the tax as a hostile act. Several other countries have plans for a similar tax.

On October 18, the US imposed tariffs on goods worth $7.5 billion from European Union (EU) countries. In response, the EU introduced import duties of 25% on American goods worth $2.8 billion.

These moves follow a World Trade Organization (WTO) ruling on Oct. 2 on a 15-year dispute over subsidies given to airplane manufacturers Boeing and Airbus. This decision found that EU subsidies had been unfair. A ruling on US subsidies for Boeing is expected in 2020.

»RELATED: Are Mortgage Rates Increasing in January 2019?

More?

On Dec. 2, President Trump tweeted:

Brazil and Argentina have been presiding over a massive devaluation of their currencies. which is not good for our farmers. Therefore, effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the U.S. from those countries.

Some in the media are lumping this in with the new tariffs against France and the president’s remarks in London on the US-China trade talks. Last week, commentators were referring to a return of “The Tariff Man,” a term President Trump used to describe himself last year.

How trade disputes hurt

All this has been fueling uncertainty in markets. And that, in turn, is creating volatility. Many of the recent wild swings in mortgage rates, bond yields, stock markets, and gold and oil prices have been down to hopes and fears over trade.

Markets generally hate trade disputes because they introduce uncertainty, dampen trade, slow global growth and are disruptive to established supply chains. President Trump is confident that analysis is wrong and that America will come out a winner.

However, some fear a trade war — possibly on two or more fronts — might be a drag on the global economy that hits America hard. And that fear, in turn, is likely to exert long-term downward pressure on mortgage rates, relieved only by hopeful news.

Impeachment

On Sept. 25, The New York Times suggested the current move in the House of Representatives to impeach the president may have only a limited effect on markets. It used the word “fleeting” to describe the probable impact. And, at least so far, its prediction seems to be holding up, in spite of some dramatic scenes on Capitol Hill.

However, the Times went on to warn that the knock-on effects could become more sustained and damaging. That might arise if the president uses escalations in the trade war with China to distract voters from proceedings in Congress.

Alternatively, the Times speculated, the effects might be benign if they mean he personally is distracted by the process and loses focus on trade.

Remember, those who want lower mortgage rates need bad news.

Treasurys and mortgage rates

Why are mortgage rates currently so often out of sync with the markets they usually shadow? After all, markets are generally interdependent.

During economically worrying times (the opposite happens when confidence is high), investors sell stocks because they fear a downturn. But they have to put their money somewhere. So they buy lower-yield but safer “risk-off” investments, such as US Treasurys, gold and mortgage-backed securities (MBSs).

MBSs are bundles of individual mortgages, wrapped up within a bond-like “security” (a tradable financial asset) and sold on a secondary market. And, the more investors want to buy them, the lower the mortgage rate you’re likely to be offered.

Markets in sync

Usually, the flows of money are fairly even across risk-off markets. So you can typically assume that gold and bond prices will go up or down roughly in line both with each other and inversely with falling or rising stock prices.

And the same applied to MBSs. In fact, the relationship between 10-year Treasury yields and mortgage rates was for years so close that many (wrongly) assumed the two were formally linked.

Why the change?

But nobody could make that mistake now. For example, between our report on the morning of November 1 and markets closing on the afternoon of the next business day, those yields climbed to 1.79% from 1.70%. But average mortgage rates edged up by only 2 basis points (a basis point is one hundredth of one percentage point) across those two trading days.

Indeed, on Nov. 21, those yields edged up, even as average mortgage rates moved down.

So why are the MBSs that actually determine mortgage rates drifting apart from risk-off investments generally and those Treasury yields in particular? There are three main reasons:

  1. Investors are concerned they’re not being rewarded sufficiently for the extra risk they shoulder when they buy MBSs rather than Treasury bonds. In particular, the US Treasury never welshes or redeems its bonds early, making those ultrasafe and predictable. Meanwhile, mortgage borrowers often refinance and occasionally default
  2. Some are worried about government reform of Fannie Mae and Freddie Mac. On Oct. 28, National Mortgage Professional magazine suggested, ” … we have now seen the implementation of the first steps, some of which have only increased market volatility.”
  3. The things that spook or please investors in Treasury bonds don’t always apply to mortgage-backed securities

And another factor affects mortgage rates rather than MBSs themselves. Mortgage lenders are distrustful of extreme volatility and often take a wait-and-see stance before adjusting the rates they offer

Forecasting issues

Those Treasury yields are one of the main indicators (see the “market data” list above for others) we use to make predictions about where rates will head. And, with those tools more unreliable than usual, we sometimes struggle to get our daily predictions right. Until the relationship between rates, yields and other indicators gets back in sync, you should bear that in mind.

“Inverted yield curve” is easy to understand

You’ve probably read a lot of headlines recently about the “inverted yield curve.” But it’s the sort of impenetrable jargon that most of us skip over on the grounds life’s already too short.

But hold on! It’s actually easy to understand. It simply means that short-term US Treasury bills, notes and bonds are giving higher yields than long-term ones. Yes, that’s rare. You usually expect to get a better return the longer you commit to an investment.

It’s also a little scary. Frequently, in the past, when the yield curve has inverted, a recession has soon followed. That doesn’t mean it will this time. But it’s a bit worrying.

Critical yield curve inverted

Any time yields are lower on longer-term bonds than shorter ones, that’s an inversion. But it’s when the 2- and 10-year Treasury yields (the return you get on those US government securities) invert that has proved to be the most reliable — close to infallible — predictor of recessions.

And those two hadn’t crossed the line since June 2007 — until mid-August this year. Since then, they’ve crossed and recrossed it a number of times.

Unless you’re in hiding, you can’t have missed the resulting doom-laden media reports, full of dire predictions. In fact, right now, there are few other noticeable signs of a recession looming. And some say fears are overblown.

What is Brexit?

For the first time since 2016, Brexit was playing a major role in the determination of American mortgage rates during part of October. However, it now seems safe to relegate it to a much less important influence.

Brexit is Britain’s exit from the European Union (EU) after 46 years of membership of the world’s largest trading bloc. A nonbinding (advisory) referendum in June 2016 saw a small majority of voters in favor of leaving. But the simple in-or-out question disguised a vastly nuanced series of issues. And, so far, successive governments and parliaments have found it impossible to identify a formula that most legislators could support.

What looks likely to happen over Brexit

The UK is currently in the midst of a general election campaign, culminating in a vote this Thursday (Dec. 12). The outcome will be known on the following day. And a shock result could impact American mortgage rates, though probably only briefly.

Right now, the incumbent Conservative party has a comfortable lead in the polls. However, the British electoral system means such a lead may not be as decisive as the figures suggest. And there’s no guarantee an electorate that’s as equally divided and partisan as the politicians won’t return another “hung parliament,” meaning one in which no party has an overall majority. That could make the deadlock even worse. And there’s a chance there might yet be a second referendum.

But, for now, the likelihood is that we’ll see an intermission in the long-running Brexit saga while the UK tries to find a way to break its political impasse. It may be early in 2020, if not later, before Brexit affects American mortgage rates again.

Lower rates ahead?

On Sept. 6, CNBC ran a studio interview with Bob Michele, CIO of J.P. Morgan Asset Management. In that interview, Michele predicted that the yield on 10-year Treasurys would hit zero before the end of this year.

On the same day, Lawrence Yun, the National Association of Realtors® chief economist, said he could envisage a new record-low mortgage rate of 3.3% — also before the end of this year.

By all means, take cheer from these predictions. But never forget a remark made by the late Harvard economics professor John Kenneth Galbraith:

The only function of economic forecasting is to make astrology look respectable.

Certainly, the recent pattern of rises and falls suggests an uneven path, even if those prognosticators are ultimately proved right. And, with the New Year looming, they’re running out of time.

Negative mortgage rates

Just don’t expect zero or negative mortgage rates in America anytime soon. Still, they’re not unthinkable within a year or two.

Already, Denmark’s Jyske Bank is offering its local customers a mortgage with a nominal interest rate of -0.5%. Yes, that’s minus 0.5%. However, after fees, that’s likely to be closer to a free or incredibly cheap mortgage than one that actually pays borrowers.

Rate lock recommendation

We suggest

We suggest that you lock if you’re less than 30 days from closing. Some professionals are recommending locking even further out from closing. And we wouldn’t argue with them.

However, that doesn’t mean we expect you to lock on days when mortgage rates are actively falling. That advice is intended for more normal times.

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 future falls. But 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.

My advice

Bearing in mind professor Galbraith’s warning, I personally 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

But it’s entirely your decision.

» MORE: Show Me Today’s Rates (December 9, 2019)

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 (December 9, 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.