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Mortgage rates today, June 23, 2020, plus lock recommendations

Peter Warden
The Mortgage Reports editor

Forecast plus what’s driving mortgage rates today

Average mortgage rates inched lower yesterday, remaining within a range that two weeks ago would have been hailed as a record low. And today’s rate for a 30-year, fixed-rate conventional loan is starting as at 3.25% (3.25% APR)

Since last Tuesday, mortgage rates have barely moved, never straying more than 2 basis points (a basis point is one hundredth of 1%) from that day’s level. That’s good because they’ve been becalmed at an exceptionally low level. But it means they may move sharply next time the wind rises. Trouble is, nobody knows when that will be or in which direction it will be blowing.

Find and lock current rates. (Jul 4th, 2020)
Program Rate APR* Change
Conventional 30 yr Fixed 3.25 3.25 -0.06%
Conventional 15 yr Fixed 3 3 Unchanged
Conventional 5 yr ARM 4.75 3.508 -0.05%
30 year fixed FHA 3.25 4.234 +0.06%
15 year fixed FHA 2.75 3.694 Unchanged
5 year ARM FHA 3.75 3.761 Unchanged
30 year fixed VA 2.625 2.8 Unchanged
15 year fixed VA 2.813 3.139 -0.06%
5 year ARM VA 3.5 2.809 Unchanged
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

• COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.


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Market data affecting (or not) today’s mortgage rates

Are mortgage rates again aligning more closely with the markets they traditionally follow? It’s too soon to be sure. But, if you’re ready to take your cue from them, things are looking worse for mortgage rates today. Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with roughly the same time yesterday morning, were:

  • The yield on 10-year Treasurys moved up to 0.72% from 0.68%. (Bad for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were higher. (Bad for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices rose to $40.46 a barrel from $39.67 (Neutral for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices nudged up to $1,779 an ounce from $1,774. (Neutral 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.
  •  CNN Business Fear & Greed index inched lower to 53 from 54 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

*A change of a few dollars on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Important notes on today’s mortgage rates

Naturally, few buying or refinancing will actually qualify for the lowest rates you’ll see bandied around in some media and lender ads. Those are typically available only to people with stellar credit scores, big down payments and robust finances (so-called top-tier borrowers). And, even then, the state in which you’re buying can affect your rate.

Still, prior to locking, everyone buying or refinancing stands to lose when rates rise or gain when they fall.

When movements are very small, many lenders don’t bother changing their rate cards. Instead, you might find you have to pay a little more or less on closing in compensation.

Overall, we still think it possible that the Federal Reserve’s going to drive rates even lower over time. However, there was a lot going on here, even before the green shoots of economic recovery began to emerge. There’s even more now. And, as we’ve recently seen, the Fed can only influence some of the forces that affect mortgage rates some of the time. So nothing is assured.

Read “For once, the Fed DOES affect mortgage rates. Here’s why” to explore the essential details of that organization’s current, temporary role in the mortgage market.

Rate lock advice

My recommendation reflects the success so far of the Fed’s actions. I personally suggest:

  • 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

But it’s entirely your decision.

The Fed might end up pushing down rates even further over the coming weeks, though that’s far from certain. (Read on for specialist economists’ forecasts.) And you can expect bad patches when they rise.

As importantly, the coronavirus has created massive uncertainty — and disruption that seems capable of defying in the short term all human efforts, including perhaps the Fed’s. So locking or floating is a gamble either way.

What economists expect for mortgage rates

So far this month, economic reports may have changed a lot of economists’ expectations. Pretty much everyone was shocked by the latest, much better-than-expected employment and retail sales figures. But many were sobered by the Federal Reserve’s worrying forecasts for economic growth and employment on June 10.

It’s too soon to say that those have transformed the economic landscape. But read the following with the knowledge that at least one of the forecasts cited was made well before any of those events.

Looking good … to most

On May 21, Realtor.com® Chief Economist Danielle Hale predicted low mortgage rates for the foreseeable future. Of course, it’s unlikely she meant there would be a continuing straight line that only went downward. Some rises along the way are pretty much inevitable.

“We expect mortgage rates to stay low and possibly slip lower,” Hale said on Realtor.com. “We’ll flirt with the 3% threshold for a while before we go below it.”

And she’s already been proved right. But, of course, not all experts share Hale’s rosy view, at least over the medium term. Indeed, her own publication, Realtor.com, said recently that it thought rates could soon rise above their then-current sub-3% level.

See the table below for forecasts from Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA).

Mortgage rates forecasts for 2020

The only function of economic forecasting is to make astrology look respectable. — John Kenneth Galbraith, Harvard economist

Galbraith made a telling point about economists’ forecasts. But there’s nothing wrong with taking them into account, appropriately seasoned with a pinch of salt. After all, who else are we going to ask when making financial plans?

Fannie Mae, Freddie Mac and the MBA each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

The numbers

And here are their latest forecasts for the average rate for a 30-year, fixed-rate mortgage during each quarter (Q1, Q2 …) in 2020. All (including Freddie’s, which is now a quarterly report) were published last week.

Forecaster Q1 Q2 Q3 Q4
Fannie Mae 3.5% 3.2% 3.1% 3.0%
Freddie Mac 3.5% 3.4% 3.3% 3.3%
MBA 3.5% 3.3% 3.4% 3.4%

So, suddenly, Fannie Mae’s optimism is the outlier. And nobody’s expecting a quarterly average below the 3.0% mark this year.

What should you conclude from all this? That nobody’s sure about much but that wild optimism about the direction of mortgage rates might be misplaced.

Further ahead

The gap between forecasts is real and widens the further ahead forecasters look. So Fannie’s now expecting that rate to average 2.9% throughout next year, while Freddie’s anticipating 3.2%. And the MBA thinks it will be back up to 3.5% for the last half of 2021. Indeed, the MBA reckons it will average 3.7% during 2022. You pays yer money …

Still, all these forecasts show significantly lower rates this year and next than in 2019, when that particular one averaged 3.94%, according to Freddie Mac’s archives.

And never forget that last year had the fourth-lowest mortgage rates since records began. Better yet, this year may well deliver an all-time annual low.

Mortgages tougher to get

The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others.

Worse, many have been putting restrictions on their loans. So you might have found it harder to find a cash-out refinance, a loan for an investment property, a jumbo loan — or any mortgage at all if your credit score is damaged.

All this makes it even more important than usual that you shop widely for your mortgage and compare quotes from multiple lenders.

That credit tightening in figures

The Mortgage Lender Sentiment Survey, published by Fannie Mae on June 11, suggested that problem continues. Its survey of lenders found, “the net share of lenders reporting easing credit standards for both the prior three months and the next three months significantly decreased, reaching survey lows.”

In the MBA’s May Mortgage Credit Availability Index (MCAI) report, published June 9, the index fell less sharply than in April: by 3.1%. However, it’s important to recognize that any fall represents a tightening in the credit standards lenders use. So things may not be getting worse as quickly as they were but they’re still getting a little worse.

However, some see some light in this gloom. When two weeks ago National Mortgage Professional magazine hosted an expert panel discussion about mortgages for those with “credit issues in the past such as foreclosures, bankruptcy, late payments or other isolated credit issues,” there were knowledgeable participants who expected a resurgence in activity soon.

Economic worries

Mortgage rates traditionally improve (move lower) the worse the economic outlook. So where the economy is now and where it might go are relevant to rate watchers. And, in spite of those recent, better-than-expected reports, there’s unfortunately plenty of potentially bad news that could have a negative effect on the US and global economies.

COVID-19 still a threat

Some states are still seeing worrying increases in COVID-19 infections and deaths. Indeed, last Friday saw the highest daily number of new infections in America in seven weeks. And, this morning, The Washington Post reported:

Twenty-nine states and U.S. territories posted an increase Monday in their rolling average of new reported cases, with nine states reporting record average highs.

This is all part of the first wave of the pandemic. But, of course, the specter of a possible second wave later in the year remains.

Non-pandemic news

Meanwhile, in other news, yesterday saw a brief blip in markets when White House trade adviser Peter Navarro told Fox News that the trade deal with China was “over.” President Donald Trump quickly stepped in with a tweet: “The China trade deal is fully intact. Hopefully they will continue to live up to the terms of the agreement!”

Still, as we’ve been reporting over the last few days, relations between Washington DC and Beijing have recently been especially strained. And, last week, the US fell out with European countries over the taxing of American companies there. Inevitably, those raise the possibility of a new trade war, perhaps on two fronts.

As worryingly, an actual war could be brewing on the border between India and China. Those (both nuclear powers) are the world’s two biggest countries by population and rank second and fifth by gross domestic product (GDP).

Domestic threat

Most important recent economic data have been looking good. For example, the latest employment and retail sales numbers were way better than most economists expected. But you need to see them in their wider context.

First, they follow disastrous lows. You expect record gains after record losses. And, secondly, the pandemic is far from over, with some states still recording frightening numbers of new cases and deaths.

So, while good news is more than welcome, it can mask the devastation wreaked on the economy by COVID-19.

Worries

Some concerns that remain valid include:

  1. We’re currently officially in recession
  2. Unemployment is expected to remain elevated for the foreseeable future — And last Thursday’s new weekly jobless claims were actually worse than anticipated
  3. On June 17, the Federal Reserve Bank of Atlanta’s GDPNow™ running resource put its real GDP growth forecast for the current quarter at -45.5% (yes, that a minus)
  4. On June 1, the Congressional Budget Office reduced its expectations of US growth over the period between 2020 and 2030. Compared with its forecast in January, the CBO now expects America to miss out on $7.9 trillion in growth over that decade

Not only are we not yet out of the woods, but we may still have no clue where their boundaries are located.

What shape will a recession take?

Economists are squabbling about the shape (if you pictured it on a graph) the recession might take.

For a while, a V-shaped one (sharp dip and sharp recovery) was favorite. And it still is for some. Indeed, they may well be preening themselves following the latest employment and retail sales reports.

But other shapes are available. So some think a W more likely, especially if there’s a second wave of coronavirus infections following the early ending of lockdowns. A “Nike swoosh” (based on that company’s famous logo) is gaining popularity. That’s a sharp drop followed by a gradual recovery. 

But on May 29, The New York Times urged everyone to “Forget swooshes and Vs. The economy’s future is a question mark.” By which it meant, quit squabbling because nobody has a clue.

Markets seem untethered from reality — or not?

We’ve recently been accusing markets (or the investors who make them up) of being untethered from reality. And we’ve been quoting a May 15 headline in The New Yorker: “Have the Record Number of Investors in the Stock Market Lost Their Minds?”

On June 16, controversial, Nobel-prizewinning, Princeton economist Paul Krugman wrote this for The New York Times:

What are these investors thinking? I don’t think they are thinking — not really. The conventions of financial reporting more or less require that articles about market action ascribe rationality to investors, so stock movements are attributed to optimism about economic recovery, or something. But the reality is that we’re largely talking about young men, many with a background in sports betting, who have started buying stocks and are bullish because they’ve made money so far.

On June 14, CNN Business reported that just one online brokerage, TD Ameritrade, had opened 608,000 new accounts during the first quarter of this year. That was more than double the number in the previous quarter. Some, such as Krugman, see this as a response to lockdown, with inexperienced and unknowledgeable amateur investors piling into a high-risk environment.

Economic reports this week

Perhaps owing to that surge in inexperienced investors, markets have in recent months been shrugging off unwelcome economic reports and reacting only to those that contain positive information. That may well continue this week.

In more normal times, Friday would be the most important day for news. It’s then that May’s figures emerge for personal income, consumer spending and core inflation. It also brings the final reading of the consumer sentiment index for this month.

Forecasts matter

More normally, any economic report can move markets, as long as it contains news that’s shockingly good or devastatingly bad — providing that news is unexpected.

That’s because markets tend to price in analysts’ consensus forecasts (below, we 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.

This week’s calendar

This week’s calendar of important, domestic economic reports comprises:

  • Monday: May Existing home sales (annualized actual 3.91 million homes sold; forecast 3.80 million)
  • Tuesday: May’s new home sales (annualized actual 676,000 new homes sold; forecast 650,000)
  • Wednesday: April home price index from the Federal Housing Finance Agency (no forecast). Plus International Monetary Fund (IMF) economic forecasts (no forecast)
  • Thursday: Weekly jobless claims to June 20 (forecast 1.38 million new claims). Third and final reading of gross domestic product for the first quarter (forecast -5.0%, as previously)
  • Friday: May report for personal income (forecast -7.0%), consumer spending (forecast +9.9%) and core inflation (forecast +0.1%). Plus June’s revised consumer sentiment index (forecast 79.3)

If markets follow recent form, they’ll cherry pick the good news in these reports and ignore the bad.

Rate lock recommendation

The basis for my suggestion

I suggest that you lock if you’re less than 15 days from closing. But we’re looking at a personal judgment on a risk assessment here: Do the dangers outweigh the possible rewards?

At the moment, the Fed mostly seems on top of things (though recent rises have highlighted the limits of its power). And I think it likely it will remain so, at least over the medium term.

But that doesn’t mean there won’t be upsets along the way. It’s perfectly possible that we’ll see periods of rises in mortgage rates, not all of which will be manageable by the Fed.

That’s why I’m suggesting a 15-day cutoff. In my view, that optimizes your chances of riding any rises while taking advantage of falls. But it really is just a personal view.

Only you can decide

And, of course, financially conservative borrowers might want to lock immediately, almost regardless of when they’re due to close. After all, current mortgage rates are at near-record lows 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. Make sure your lender is ready to act as soon as you push the button. And continue to watch mortgage rates closely.

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.

Closing help …

Closing on a real estate transaction is hard enough without the extra obstacles erected by social distancing and lockdowns. So some are trying to dismantle the biggest barriers.

Appraisals sometimes avoidable

Many lenders are already allowing “drive-by” (exterior only) home appraisals or even wholly remote ones based on desk research.

On May 5, National Mortgage Professional magazine reported that an April 14 federal government initiative to get past some closing issues was being extended until at least June 30. The magazine listed the following bullet points:

  • Alternative appraisals on purchase and rate term refinance loans
  • Alternative methods for verifying employment before loan closing
  • Flexibility for borrowers to provide documentation (rather than requiring an inspection) to allow renovation disbursements (draws)
  • Expanding the use of power of attorney and remote online notarizations to assist with loan closings

Those directly apply only to mortgages backed by Fannie and Freddie, though individual lenders may be making similar provisions for other types of loans.

… But a big issue for closings

But another closing obstacle may prove more difficult to surmount. Many county recording offices have been closed.

And, without access to the title searches and deed filings those provide, some purchases and refinancings may stall. The industry is working to overcome this obstacle. But its response is patchy, as legal website JD Supra reports:

Title insurance companies have issued underwriting bulletins confirming they will provide title insurance coverage for transactions that occur when recording offices will not accept documents for recording. Each title company has its own requirements and limitations, so it is important to confirm those requirements on a closing-by-closing basis.

If you’re affected, talk with your loan officer, attorney or real estate agent.

Verify your new rate (Jul 4th, 2020)

What causes rates to rise and fall?

In normal times (so not now), 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.

Mortgage rates FAQ

What are today’s mortgage rates?

Average mortgage rates today are as low as 3% (3% APR) for a 30-year, fixed-rate conventional loan. Of course, your own interest rate will likely be higher or lower depending on factors like your down payment, credit score, loan type, and more.

Are mortgage rates going up or down?

Mortgage rates have been extremely volatile lately, due to the effect of COVID-19 on the U.S. economy. Rates took a dive recently as the Fed announced low-interest rates across the board for the next two years. But rates could easily go back up if there’s another big surge of mortgage applications or if the economy starts to strengthen again.

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.

Verify your new rate (Jul 4th, 2020)