What’s driving current mortgage rates?
Average mortgage rates inched down by the smallest measurable amount on Friday. That was in line with our prediction for that day. However, two markets that heavily influence those rates (10-year Treasury bonds and mortgage-backed securities) reached recent lows during the afternoon.
One broker pointed out to Mortgage News Daily that rates have bounced up on the last four occasions that happened. Consequently, he was urging his borrowers to lock if they were due to close within the next 45 days. It’s usually a mistake to bet your shirt on the predictability of markets. But you might want to bear in mind that respected professional’s advice when making your own lock/float decision.
The data below the rate table are mostly indicative of unchanged or slightly higher rates in the short-term.
|Conventional 30 yr Fixed||4.58||4.591||Unchanged|
|Conventional 15 yr Fixed||4.125||4.144||Unchanged|
|Conventional 5 yr ARM||4.25||4.811||Unchanged|
|30 year fixed FHA||3.875||4.864||Unchanged|
|15 year fixed FHA||3.688||4.638||Unchanged|
|5 year ARM FHA||3.938||5.293||Unchanged|
|30 year fixed VA||4.413||4.606||Unchanged|
|15 year fixed VA||3.875||4.189||Unchanged|
|5 year ARM VA||4.063||4.546||Unchanged|
|Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.|
Financial data affecting today’s mortgage rates
Earlier, today’s market data were mixed for mortgage rates, suggesting those rates might hold steady or move up just a little over the next 24 hours. By approaching 10:00 a.m. (ET), the data, compared with this time on Friday, were:
- Major stock indexes jumped higher first thing (good for mortgage rates). At one point, the Dow Jones Industrial Average had piled on 160+ points
- Gold prices rose, standing at $1,334 an ounce compared to Friday’s $1,331. (This is 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 edged down to stand at $56 a barrel, compared with Friday’s $57 (good for mortgage rates because energy prices play a large role in creating inflation)
- The yield on ten-year Treasuries inched up to 2.67 percent. up from Friday’s 2.66 percent. That’s bad for borrowers because mortgage rates tend to follow Treasuries
- CNNMoney’s Fear & Greed Index leaped back up to 72 from Friday’s 55 (out of a possible 100). It remains solidly in “greed” territory. The rise is 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.
Rate lock recommendation
Stock markets showed a little fizz first thing, mostly as a result of the President’s optimistic talk about the current U.S.-China trade talks. However, other markets seemed less responsive to those White House comments. For example, for 10-year Treasury bonds, which is often key to mortgage rates, was slightly higher. Over the weekend, the President signaled his willingness to extend his March 1 deadline for the imposition of new tariffs. So it might be premature to expect a firm agreement anytime soon.
There is nothing likely to move mortgage rates on today’s economic calendar. But we continue to urge those who are floating to remain vigilant. It’s been more than two weeks since average mortgage rates moved outside a narrow band. That makes it more — not less — likely they’ll break out fairly soon. And markets could regain traction at any time.
So continue to watch key markets and news cycles closely. In particular, look out for stories that might impact the performance of the American economy. As a very general rule, float on bad news and lock on good.
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
- FLOAT if closing in 30 days
- FLOAT if closing in 45 days
- FLOAT if closing in 60 days
MarketWatch’s economic calendar remains slightly chaotic in the wake of the recent government shutdown. Some numbers published this week are for earlier periods than would normally be the case, and others are still being delayed.
Thursday’s release of gross domestic product (GDP) numbers might be the focus of the week, but Friday’s avalanche of data also has the potential to move markets. The latter contains some figures that are close to the GDP ones in importance. Markets generally factor in forecasts in advance. So it’s the difference between those forecasts and the actual numbers that are most likely to be disruptive.
- Monday: Nothing
- Tuesday: December housing starts (forecast 1.255 million units) and February consumer confidence index (forecast 124.0)
- Wednesday: December advance trade in goods (forecast -$74 billion) and December factory orders (forecast +0.6 percent)
- Thursday: weekly jobless claims (223,000 forecast), GDP for Q4 2018 (forecast +2.0 percent)
- Friday: personal income for both December and January (forecast +0.4 percent and +0.3 percent respectively), December consumer spending (forecast -0.3 percent), December core inflation (forecast +0.2 percent), Institute for Supply Management (ISM) manufacturing index for February (forecast 53 percent), February consumer sentiment index (forecast 95.5)
What causes rates to rise and fall?
Mortgage interest rates depend a great deal on the expectations of investors. Good economic news tends to be bad for interest rates because an active economy raises concerns about inflation. Inflation causes fixed-income investments like bonds to lose value, and that causes their yields (another way of saying interest rates) to increase.
For example, suppose that two years ago, you bought a $1,000 bond paying 5 percent interest ($50) each year. (This is called its “coupon rate” or “par rate” because you paid $1,000 for a $1,000 bond, and because its interest rate equals the rate stated on the bond — in this case, 5 percent).
- Your interest rate: $50 annual interest / $1,000 = 5.0%
When rates fall
That’s a pretty good rate today, so lots of investors want to buy it from you. You can sell your $1,000 bond for $1,200. The buyer gets the same $50 a year in interest that you were getting. It’s still 5 percent of the $1,000 coupon. However, because he paid more for the bond, his return is lower.
- Your buyer’s interest rate: $50 annual interest / $1,200 = 4.2%
The buyer gets an interest rate, or yield, of only 4.2 percent. And that’s why, when demand for bonds increases and bond prices go up, interest rates go down.
When rates rise
However, when the economy heats up, the potential for inflation makes bonds less appealing. With fewer people wanting to buy bonds, their prices decrease, and then interest rates go up.
Imagine that you have your $1,000 bond, but you can’t sell it for $1,000 because unemployment has dropped and stock prices are soaring. You end up getting $700. The buyer gets the same $50 a year in interest, but the yield looks like this:
- $50 annual interest / $700 = 7.1%
The buyer’s interest rate is now slightly more than seven percent. Interest rates and yields are not mysterious. You calculate them with simple math.
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.