Forecast plus what’s driving mortgage rates today
Average mortgage rates fell modestly yesterday. But it was enough to get them close to the all-time low set a couple of weeks ago. And today’s rate for a 30-year, fixed-rate conventional loan is starting as low as 3.25% (3.25% APR)
Chances are, yesterday’s fall was largely down to market reactions to scary new COVID-19 numbers. But some of those markets rebounded that afternoon after a change in banking regulations. So don’t assume that lower or even stable mortgage rates are a one-way bet.
|Conventional 30 yr Fixed||3.25||3.25||Unchanged|
|Conventional 15 yr Fixed||2.938||2.938||-0.06%|
|Conventional 5 yr ARM||4.125||3.276||Unchanged|
|30 year fixed FHA||3.188||4.171||+0.19%|
|15 year fixed FHA||2.625||3.568||Unchanged|
|5 year ARM FHA||3.75||3.761||Unchanged|
|30 year fixed VA||2.563||2.736||Unchanged|
|15 year fixed VA||2.813||3.139||-0.06%|
|5 year ARM VA||3.375||2.764||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.
In this article (Skip to…)
- Market data affecting today’s rates
- Important notes on today’s mortgage rates
- Rate lock advice
- What economists expect for mortgage rates
- Mortgages tougher to get due to COVID-19
- Economic worries
- Markets seem untethered from reality
- Economic reports this week
- Rate lock recommendation breakdown
- Closing help
- Mortgage Rates FAQ
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 OK 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 held steady at 0.66% . (Neutral 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 again lower. (Good 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 moved higher to $38.52 a barrel from $37.91 (Neutral for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.)
- Gold prices dropped to $1,764 an ounce from $1,773. (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 rose to 51 from 47 out of a possible 100 points. (Bad 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
Don’t be surprised if Freddie Mac’s rate reports and ours don’t exactly coincide. To start with, the two are measuring different things: weekly and daily averages. But also, Freddie tends to collect data on only Mondays and Tuesdays each week. And, by their publication each Thursday, they’re often already out of date. So you can rely on Freddie’s accuracy over time, but not necessarily each day or week.
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 already 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.
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.
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.
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.
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.
Indeed, on Wednesday, the International Monetary Fund (IMF) released its forecasts for growth this year. And it expects the global economy to shrink by 4.9%, much worse than its 3% estimate in April.
The IMF’s expectations for the US economy are even more dire. Its latest forecast for that suggests likely shrinkage of 8%. Is it any consolation that it thinks the eurozone countries will do even worse, with negative growth north of 10%?
COVID-19 still a huge threat
Yesterday, Gov. Greg Abbott of Texas announced that he was reversing the relaxation of lockdown rules, 55 days after reopening his state. The announcement came after hospitals in Houston and elsewhere reported being close to ICU capacity following a flood of new COVID-19 cases. Several other states are also recording spikes in new infections, including Idaho, Oklahoma, Montana, Florida and Arizona.
Nationwide, the situation is similarly grim. Early this morning, The New York Times was reporting that the 14-day change in new cases was +54%. And the US currently has 1.3 million active cases.
Some take comfort in the death rate not climbing as fast as infections. And the Times figure for that measure was a much more encouraging -30%. But scientists warn that mortalities always lag behind infections.
And, on Wednesday, Nicholas G. Reich, associate professor of biostatistics at the University of Massachusetts at Amherst, told The Washington Post: “As long as there is a fair amount of testing going on, if there is an uptick in covid-19 infections, then we are likely to see that in the confirmed case data before we see it in the death data.”
Reich went on to say that he expected “… rises in covid-19 deaths over the next month in many of the states that are seeing upticks in cases, like Texas, California, Florida and others, even though the deaths have been either steady or declining in recent weeks.”
Meanwhile, in other news, Monday 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!”
But, while Navarro’s slip may have been an error, it remains revealing. As we’ve recently been reporting, 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). On June 15, a skirmish resulted in 97 Indian casualties, including 20 deaths. China has not released figures for its toll.
True, this dispute has faded from the headlines recently. But the BBC yesterday showed satellite photographs taken this week of new Chinese military structures being built in the disputed border area. It may not be over.
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.
Some concerns that remain valid include:
- We’re currently officially in recession
- Unemployment is expected to remain elevated for the foreseeable future — For the past two Thursdays, new weekly jobless claims were actually worse than anticipated
- 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)
- 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
As we’ve been saying for several days, not only are we not yet out of the woods, but we may still have no clue where their boundaries are located.
Indeed, that exact sentiment was echoed on Wednesday by IMF Chief Economist Gita Gopinath, who said: “We are definitely not out of the woods. This is a crisis like no other and will have a recovery like no other.”
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, today 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.
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 (actual +5.5% year-over-year change; no forecast). Plus International Monetary Fund (IMF) economic forecasts (US economy to shrink by 8.0% in 2020; no forecast)
- Thursday: Weekly jobless claims to June 20 (1.48 million new claims; forecast 1.38 million). Third and final reading of gross domestic product for the first quarter (actual –5.0%; forecast -5.0%, as previously)
- Friday: May report for personal income (actual -4.2%; forecast -7.0%), consumer spending (actual +8.2%; forecast +9.9%) and core inflation (actual +0.1%; forecast +0.1%). Plus June’s revised consumer sentiment index (actual 78.1 index points; 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.
Up until Wednesday, we’d been providing information in this daily article about the extra help borrowers can get during the pandemic as they head toward closing.
You can still access all that information and more in a new, stand-alone article:
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
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.
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 5th, 2020)