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Mortgage Rates Today

What Factors Are Moving Mortgage Rates Today?

There were no important economic reports today, so our decision-making comes mainly from the economic data below.

Today’s Rate Lock Recommendation

Interest rates have drifted downward recently and are holding fairly steady at this time. However, some indicators point to possible rate decreases in the near term. If you are inclined to gamble, it could pay off in slightly lower rates by the end of today or tomorrow morning.

And if you need to wait a day or two to get a better price – for instance to get a cheaper 15-day lock instead of a 30-day lock, you can probably safely float in the short term. Your decision depends on your tolerance for risk and your own financial resources. Here is the full recommendation:

  • 7-day closing: LOCK
  • 15-day closing: FLOAT
  • 30-day closing: FLOAT
  • 45-day closing: FLOAT
  • 60-day closing: FLOAT

Economic Data Affecting Today’s Mortgage Rates

Here are major economic data that can impact current mortgage rates, and their likely effects:

  • Stocks Major stock indexes are mixed and flat, with the Dow slightly down and the S&P and Nasdaq up just a hair. End result? Neutral and having no effect on mortgage rates. 
  • 10-Year Treasury Yield Today’s 10-year Treasury yield fell two basis points (2/100th of 1%) from .63% to .61%. Yields on 10-year Treasuries usually move in the same direction as mortgage rates, and this move is slightly good for mortgage rates.
  • Oil Prices This morning’s oil prices dropped by .$.12 to $40.54 per barrel. That’s good for mortgage rates. Oil is a limited resource required for most economic activity in the US. Rising oil prices trigger fears of inflation and can cause interest rates to rise, while falling oil prices have the opposite effect.
  • Gold Prices This morning’s gold prices rose $8.80 to $1,818.80 per ounce. Investors buy gold when the economy weakens. Rising gold prices often go in tandem with lower interest rates, and rates often rise as gold prices fall. Today’s news is good for mortgage rates.
  • Fear vs Greed CNNMoney’s Fear vs Greed Index measures investor sentiment with a variety of metrics. When investors are confident, or “greedy,” mortgage rates tend to increase. And when investors become more “fearful,” Interest rates tend to fall. This morning’s index is in the “greedy” range, increasing from 63 to 65 since yesterday. The direction of movement (a greedier direction) is bad for mortgage rates.

Almost anything that impacts the world economy can cause mortgage interest rates to change. In most cases, news that indicates economic weakening is good for mortgage rates. That is because investors become more concerned about preserving their principal and less worried about the return they get. News that suggests economic strengthening is generally bad for mortgage rates. That’s because economic heat can also cause inflation, so investors want to see higher rates of return.

This Week’s Upcoming Releases

  • Monday: No economic releases or reports are scheduled today.
  • Tuesday: Nothing pertinent to mortgage rates
  • Wednesday: Existing Home Sales for June, expected to increase from May’s annualized rate of 3.91 million to 4.9 million. Higher home sales translates to higher demand for home loans, and that can cause mortgage rates to rise. But a lower-than-expected rate could cause interest rates to fall back.
  • Thursday: Weekly Initial Jobless Claims are anticipated to rise from last week’s 1.3 million to 1.4 million. Higher unemployment goes hand-in-hand with lower interest rates. And if claims come in higher than expected, rates could fall. If the actual figure is lower, rates could rise. However this is just a weekly figure and doesn’t have a lot of weight unless the actual numbers differ wildly from the estimate. Also on tap are June’s leading Economic Indicators. This group of metrics anticipates economic trends. If they show a warming economy, rates could rise A cooling one signals lower rates.
  • Friday: New Home Sales for June are expected to increase from an annualized $676,000 to $710,000. This foreshadows an expansion in demand for home loans, which can lead t higher pricing (interest rates or fees).

Why Do Mortgage Rates Change?

In general, positive economic news causes interest rates (including mortgage rates) to increase. That’s because an expanding economy can increase the rate of inflation, and investors demand higher returns when they are concerned about inflation. When the economy is shaky, investors become less worried about how much their money earns and more worried about losing it. So demand for safe investments like bonds increases, driving their prices up and interest rates down.

How Bonds Work

If you purchase a $1,000 bond paying 5% interest ($50) each year for $1,000, you’d be paying what’s called par pricing. 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 interest / $1,000 bond price = 5%

When Interest Rates Fall

After you purchase your bond, though the economy becomes troubled. Perhaps by political instability or a global pandemic. Investor demand for safe places to put their money skyrockets and 5% becomes highly desirable. You can sell your $1,000 bond for $1,500. The buyer gets the same $50 a year in interest that you were getting. It’s still 5% of the $1,000 coupon. However, the yield drops.

Your buyer’s interest rate: $50 annual interest / $1,500 bond price = 3.33%

When Interest Rates Rise

The opposite occurs when the economy improves. If after you purchased your $1,000 bond, the pandemic was resolved with the invention of a vaccine, and threats of war subside in volatile countries. The stock market is taking off and 5% doesn’t look so great. Investor demand falls for your bond and you can only sell it for $750. The buyer pays less and enjoys a higher yield.

Your buyer’s interest rate: $50 annual interest / $750 bond price = 6.67%

The relationship between bond prices and interest rates is predictable. It’s simple math.

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