Mortgage

Mortgage charges as we speak, August 12, 2020, plus blocking suggestions

Forecast plus today's mortgage rates

As we feared, average mortgage rates rose noticeably yesterday. They are now the highest in August, but below average in the last half of July. So you are still above average. VA loans start today at 2.25% (2.421% APR) for a 30-year fixed-rate mortgage.

It's been a while since mortgage rates rose so much. And nobody knows if it will be the first of many sustained gains or just one of these days. If I were to place a bet, I would bet that it was a one-time event that only lasted two or three days. I think it will take critical economic news to trigger a sustained period of growth. But my betting record is the reason I stay away from Vegas.

Find and block current rates. (August 12, 2020)

program
rating
APR *
change
Conventional 30 years
3.25
3.25
+ 0.19%
Conventional 15 year fixed
3.125
3.125
Unchanged
Conventional 5 year old ARM
5
3,514
Unchanged
Fixed FTA for 30 years
2.25
3.226
Unchanged
Fixed FTA for 15 years
2.25
3.191
Unchanged
5 years ARM FHA
2.75
3,346
+ 0.05%
30 years permanent VA
2.25
2,421
-0.51%
15 years fixed VA
2.25
2,571
Unchanged
5 years ARM VA
2.5
2,433
Unchanged
Your rate could be different. Click here for a personalized quote. See our tariff assumptions here.

• COVID-19 Mortgage Updates: Mortgage lenders are changing interest rates and rules due to COVID-19. For the latest information on the impact of Coronavirus on your home loan, click here.

In this article (jump to …)

Market Data That Will (Or Not) Affect Today's Mortgage Rates

Are mortgage rates back in line with the markets they traditionally follow? It is certainly an inconsistent relationship that is being confused by the Federal Reserve interventions behind the scenes. This is currently buying mortgage bonds and has an invisible impact on interest rates.

But if you still want to focus on the markets, things are like that look again Bad for mortgage rates today. Why? Investors see cause for optimism about the recovery.

The payment

Here is the current status at 9:50 a.m. (ET) this morning. The dates, compared to about the same time yesterday, were:

The 10-year Treasury yield continued from 0.64% to 0.67%. (Bad for mortgage rates.More than any other market, mortgage rates usually tend to follow these particular government bond yields, albeit more recently
Important stock indices were mostly much higher. (Bad for mortgage Prices.Often times, when investors buy stocks, they sell bonds, which lowers the prices of those stocks and increases yields and mortgage rates. The opposite happens when the indices are lower
The oil price fell from $ 42.66 to $ 42.35 a barrel (Neutral for mortgage rates * because energy prices play a huge role in creating inflation and also indicate future economic activity.)
Gold prices fell from $ 1,963 an ounce to $ 1,947. (Bad for mortgage rates *.) In general, it is better for interest rates when gold rises and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to cut rates.
CNN Business Fear & Greed Index dropped from 75 out of 100 possible points to 73. (Good for mortgage rates.) "Greedy" investors push bond prices down (and interest rates up) when they exit the bond market and invest in stocks, while "fearful" investors do the opposite. Lower readings are therefore better than higher ones

* A few dollars change in gold prices, or a matter of pennies in oil prices, is a fraction of 1%. Hence, we count significant differences in mortgage rates only as good or bad.

Advice on rate lock

My recommendation reflects the success of the Fed's efforts to date to keep interest rates above average. I personally suggest:

LOCK when you approach 7th Days
LOCK when you approach fifteen Days
HOVER when you approach 30th Days
HOVER when you approach 45 Days
HOVER when you approach 60 Days

But it's entirely up to you. And you might still want to lock on days when interest rates are at or near their all-time low.

The Fed could cut rates even further in the coming weeks, though this is far from certain. Regardless, persistent bad news about COVID-19 could have a similar effect on markets. (Read on for the economists' predictions.) However, expect bad spots as they rise.

Equally important, the coronavirus has created massive uncertainty – and disruptions that, in the short term, can defy all human efforts, including perhaps that of the Fed. So locking or hovering is a gamble in either case.

Important information about today's mortgage rates

The rate you actually get

Of course, few purchases or refinances qualify for the lowest interest rates found in some media and lender ads. As a rule, these are only available to people with excellent credit scores, high down payments and solid finances ("top tier borrowers" in technical jargon). And even then, the state you are buying in can affect your rate.

Before locking, however, anyone buying or refinancing can typically lose if rates go up or win if they go down.

When the moves are very small, many lenders don't bother changing their price lists. Instead, you may have to pay a little more or less to get compensation.

The future

Overall, we still believe that the Federal Reserve will cut rates even further over time. And after the last meeting of its Political Committee, the organization confirmed that it plans to stick with this strategy for as long as proves necessary. At a press conference, Fed chairman Jay Powell promised:

We use all of our tools to support our economy in this challenging environment.

But there was a lot going on here even before the green shoots of economic recovery emerged. Now there is more. And, as we saw earlier, the Fed can only influence some of the forces that sometimes affect mortgage rates. So nothing is insured.

Read “For once, the Fed is affecting mortgage rates. Here's why you want to examine the essential details of this organization's current, temporary role in the mortgage market.

Higher rates to deter demand

There may soon be a repeat of a phenomenon that began earlier this year. In this case, the lenders' offices are so overwhelmed by the demand for mortgages and refinancing that they cannot handle them.

In the latest figures for the week ending July 24, the Mortgage Bankers Association calculated: "The refinancing index is down 0.4 percent from the previous week and 121 percent higher than the same week a year ago." Processing more than twice as many applications as in normal times must be a major challenge.

To try to discourage some of the excessive demand, lenders can artificially increase the interest rates they offer. This is the only way to prevent your people from drowning in paperwork.

And neither the markets nor the Fed can influence how this part of the pricing mechanism affects mortgage rates.

Freddie Mac's weekly prices

Don't be surprised if Freddie's Thursday reports and ours seldom match. First, the two measure different things: weekly and daily averages.

But Freddie usually only collects data on Mondays and Tuesdays per week. And they are often out of date by the day of publication. So you can count on Freddie's accuracy over time, but not necessarily every day or every week.

What Economists Expect from Mortgage Rates

Mortgage rate forecasts for 2020

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

Galbraith was clear about the economists' forecasts. But there is nothing wrong with considering them appropriately seasoned with a pinch of salt. Who else are we going to ask when making financial plans?

Fannie Mae, Freddie Mac, and the MBA each have a team of economists devoted to monitoring and forecasting the impact on the economy, housing, and mortgage rates.

The payment

And here are her latest forecasts for the average interest rate on a 30-year fixed mortgage every quarter (Q1, Q2 …) in 2020. Fannie updated his forecasts on July 14 and the MBA updated them the following day. Freddies, which is now a quarterly report, was released in mid-June.

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

As a result, none of the forecasters expects a quarterly average below the 3.0% mark this year. Of course, this does not rule out daily or weekly averages that are below this level in a quarter. Finally, quarterly averages can have some pretty sharp differences between highs and lows.

Both Fannie and the MBA were somewhat more optimistic about interest rates in their (monthly) July forecasts. And that makes Freddie's June (quarterly) look stale.

What should you conclude from this? That no one is sure about much, but that wild optimism about the direction of mortgage rates may be out of place.

Forward

The gap between forecasts is real and increases the further the forecasters look ahead. Hence, Fannie now expects this rate to average 2.9% in the first half of next year and drop to 2.8% in the second half.

Freddie expects 3.2% this year. And the MBA assumes that it will again be 3.4% in the first half of 2021 and 3.5% in the second. The MBA assumes that it will average 3.7% in 2022. You pay your money …

Still, all of these projections show significantly lower rates this year and next than they were in 2019, when it averaged 3.94% according to the Freddie Mac archives.

And remember, last year was the fourth lowest mortgage rate on record. Better still, this year could be an all-time low – barring shocking news. Of course, shocking news is a low bar in 2020.

Mortgages are harder to come by

The mortgage market is very chaotic right now. And some lenders offer significantly lower interest rates than others. When you borrow large sums of money, such differences can add up to several thousand dollars in a few years – more for larger loans and over longer periods of time.

Worse still, many have restricted their credit. You may have a harder time finding a withdrawal refinance, investment loan, jumbo loan, or mortgage if your creditworthiness is damaged.

All of this makes it even more important than usual that you bulk buy your mortgage and compare quotes from multiple lenders.

Economic worries

Mortgage rates traditionally improve (decrease) the worse the economic outlook. Where the economy is now and where it might go is relevant to rate watchers.

The President's weekend announcements

To break the partisan congestion in Congress, President Donald Trump signed a series of executive orders and memoranda over the weekend.

Some hoped the president's initiative could be a catalyst for lawmakers on Capitol Hill who failed to come up with their own stimulus package. But no. Although the Senate remains in session, a very small number of DC lawmakers remain.

The measures are set to boost the economy, mainly by providing $ 300 weekly benefits to the unemployed (the White House made it clear yesterday that only some could receive $ 400) and by suspending wage tax payments for those who earn less , for the last four months of this year being about $ 100,000.

Another order seeks to reduce the number of evictions the pandemic could cause. And a fourth could help those who pay student loans.

These measures have to overcome two hurdles. First, the experts disagree on the legality and constitutionality of the initiatives. And when he announced it, the President himself admitted that some of his actions could be challenged in court.

Practical questions

Second, some point to practical issues that could undermine the measures. Last but not least is the time it might take to implement. Treasury Secretary Steven Mnuchin said yesterday he hoped unemployment benefits would get under way "within the next week or two". But some doubt the likelihood of it.

And there are other practical questions. The money will appear to come from FEMA funds of $ 44 billion, leaving this agency with limited resources to deal with a future disaster. However, some say $ 44 billion will fund the president's program for less than five weeks. And this program would only help those on $ 100 or more government unemployment benefits, leaving the hardest hit with no additional help.

Payroll problems

The income tax initiative is at least as full. Employers are asked to suspend withholding tax for these four months. However, there are concerns that many are not cooperating.

This is because their employees continue to owe the tax regardless of whether it is withheld or not. And they won't be grateful when faced with huge bills next year. Employers are also legally liable for deficits that arise because taxes are not properly withheld.

So many can protect themselves and their employees by creating escrow accounts into which withheld taxes are paid – or at least waiting for the details of the program to be clearer. And that would undermine the aim of the executive order to put more money in the pockets of consumers quickly.

The president hopes that the tax that is not withheld will eventually be forgiven. But that's not currently in his gift.

Minor measures and their problems

The eviction only instructs the Department of Health and Human Services and the Centers for Disease Control and Prevention to "consider" the need to further suspend the evictions. It has no immediate effect.

A fourth initiative waived interest on student loans for a period and suspended the collection of principal payments.

Politics is a growing issue

The threats to the economy posed by the current deadlock in Congress are obvious. And you can see why the president wanted to intervene.

There can be good ideological and long-term economic reasons for discontinuing additional unemployment benefits. However, in the short term, it could affect millions, including those who don't receive it directly.

Most obviously, landlords may not receive their rents and will face the expense of evicting tenants and finding new tenants while they are unable to pay their own mortgages. And lenders (those who offer credit cards, personal loans, auto loans, etc., as well as mortgages) could encounter defaults, redemptions, and foreclosures across a broad population.

It is also important that some economists warn that the end of federal benefits could affect consumer spending, which could quickly affect the overall economy. On August 3, the Financial Times had the headline "US Economy at Risk as Unemployment Benefit Expires".

Consumers are the key to the US economy

Do you think the Financial Times exaggerated? Maybe. However, the US economy relies heavily on consumer spending for growth.

According to the Federal Reserve Bank of St. Louis, personal consumption was a heavy contributor to 67.1% of total gross domestic product in the second quarter of 2020.

Even ignoring human misery, political paralysis could prove costly to the economy. In the meantime, a small business aid program expired last Saturday.

COVID-19 is still a major threat

This pandemic and its economic impact are the biggest impact on the markets right now. Last Saturday, the nation reached a new, gruesome milestone when the total number of infections hit 5 million.

But after all, there may be a hint of good news in the numbers. As of July 31, the New York Times reports that the number of new infections has changed negatively in the past 14 days: -18% yesterday. Of course, the actual numbers are still appalling, and 53,334 Americans were newly diagnosed yesterday. Until recently, it was still over 60,000.

Unfortunately, deaths remain at terrible levels. Yesterday the number was 1,450. However, according to the Times, Monday's 14-day change in deaths turned negative for the first time in ages. It was -7% yesterday. So there are better trends for both infections and deaths. We must now hope that it will continue to do so as the rules on social distancing and face masks are relaxed.

But there are still many states and cities that continue to be hot spots with increasing infections and deaths. In a virus briefing at the White House on July 21, President Donald Trump warned:

Unfortunately, it will likely get worse before it gets better. Something I don't like to say about things, but it is.

Non-pandemic news

Although the COVID-19 news dominates both broadly and in the markets, there is still room for other fears. Concerns about trade and external relations with China are currently high.

As the Financial Times suggested on July 24th:

Tensions between the world's two superpowers have soared to their most dangerous levels in decades when the coronavirus pandemic in the US and Beijing impacted Hong Kong's autonomy.

And that was before newer tensions emerged. This includes the president who plays hardball over Tik-Tok and WeChat. Yesterday, on Monday, China announced sanctions against a number of US officials, including Senators Cruz and Rubio.

Domestic threat

The key economic data has been looking good lately. But you have to see them in their wider context.

First, they follow catastrophic lows. They expect record profits after record losses.

Second, the pandemic is far from over. Some states are still recording staggering numbers of new cases and deaths.

While good news is more than welcome, it can mask the havoc COVID-19 has wreaked on the economy.

To care

Some concerns that still apply are:

We are currently officially in a recession

Unemployment is expected to continue to rise for the foreseeable future. The new unemployment insurance claims last week were 1.19 million, significantly better than the 1.43 million the previous week. But that was the 20th week in a row that new claims exceeded the million mark. And all of these would have been unimaginably high numbers at the beginning of the year
The first official estimate of gross domestic product in the second quarter showed an annualized decline of 32.9%. If you look at the second quarter in isolation (not annualized), the decline in economic output in these three months was around 9.5%

Ön June 1stThe Congressional Budget Office reduced its expectations for US growth between 2020 and 2030. Compared to its forecast in January, the CBO now expects America to miss out on growth of $ 7.9 trillion in this decade

As the chief economist of the International Monetary Fund (IMF), Gita Gopinath, said some time ago: “We are definitely not out of the woods. This is a crisis like no other and will recover like no other. "

Third quarter GDP

Do you have to cheer up after all this? The Federal Reserve Bank of Atlanta’s BIPnow readings suggest we could see 20.5% growth in the third quarter, according to an August 7 update.

But this is also an annual rate. So it has to be compared to the 32.9% loss in the second quarter. And there will still be time before the economy falls behind if further lockdowns are required or federal benefits – whether announced by the president or a subsequent congressional package – take a long time to implement.

Still, we could look at a light at the end of this pitch-dark tunnel.

The markets don't seem to be tied to reality

Many economists warn that stock markets may underestimate both the long-term economic impact of the pandemic and its unpredictability. And some fear that we are currently in a bladder that can only cause more pain if it bursts. James Knightley, ING's Chief International Economist, was quoted by CNN Business on Aug. 2 as saying:

Given mounting virus fear, job loss and pressure on incomes, we believe the recovery could be a lot bumpier than the markets seem and believe we expect some data disappointment over the next few months have to.

Economic reports this week

It's another busy week for economic reports. And Friday is the day to watch out for.

It is true that there are measures of inflation earlier. But it's been a long time since they looked worrying, though some economists believe they might do it again soon. Today's consumer price index and Tuesday's producer price index haven't allayed fears.

Friday brings retail sales, industrial production and the consumer sentiment index.

Investors will also keep an eye on Thursday's weekly unemployment rate. If these fall below the million mark, we could easily see higher mortgage rates.

Predictions are important

Ordinarily, any economic report can move the markets as long as it contains news that is shockingly good or devastatingly bad – provided that news is unexpected.

This is because the markets tend to evaluate the analysts' consensus forecasts (hereinafter we use those reported by MarketWatch) before the reports are released. Therefore, it is usually the difference between the numbers actually reported and the forecast that has the greatest effect.

And that means that even an extreme difference between the actual values ​​of the previous reporting period and this one can hardly have immediate effects, provided that this difference is expected and has been taken into account in advance.

Calendar this week

T.His week's calendar of major domestic economic reports includes:

Monday: Nothing

Tuesday: July Producer price index for final demand (actually + 0.6%; forecast + 0.3%)

Wednesday: July Consumer price index (actually +0.6%; Forecast + 0.4%) and Core CPI * (actually + 0.6%; forecast + 0.2%).

Thursday: Weekly new unemployment claims by August 8 (forecast 1.08 million new claims for unemployment insurance)

Friday: July Retail sales (Forecast + 2.0%) and Retail sales minus cars (Forecast + 1.1%). Plus July industrial production (Forecast + 2.5%) and Capacity utilization ** (Forecast 70.4%). And August Consumer sentiment index (Forecast 71.9 index points)

* The core CPI is the volatile consumer price index Food and energy prices moved out.

** Capacity utilization is the Percentage of the country's production and manufacturing capacity that is actually used.

As is often the case, Friday is the big day of this week.

Rate lock recommendation

The basis for my proposal

Unlike on exceptionally good days, I suggest you Lock if you are less than 15 days after closing. However, we're looking at a personal judgment on a risk score here: Do the dangers outweigh the potential rewards?

At the moment, the Fed mostly seems to be keeping an overview (although the surge has shown the limits of its power since its interventions began). And I think it will probably stay that way, at least in the medium term.

But that doesn't mean there won't be any disruptions along the way. It is entirely possible that mortgage rates will rise during times when not all of them are manageable by the Fed.

That is why I propose a 15-day cutoff. In my opinion, this optimizes your chances of driving uphill and taking advantage of falls. But it's really just a personal view.

Only you can choose

And of course, financially conservative borrowers may want to lock up immediately, almost regardless of when they close. After all, current mortgage rates are at or near record lows and much is secured.

On the flip side, risk takers might prefer to take their time and seize an opportunity in future falls. But only you can decide what risk you are personally comfortable with.

If you're still floating, stay vigilant until you lock. Make sure your lender is ready to act as soon as you hit the button. And keep watching mortgage rates closely.

When should I block anyway?

You may still want to put your loan on hold if you are buying a home and have a higher debt-to-income ratio than most. In fact, you should be more inclined to lock up as interest rate hikes could ruin your mortgage approval. As you refinance, it becomes less critical and you can potentially gamble and soar.

When your graduation is weeks or months away, the decision to lock or float becomes complicated. Obviously, if you know rates are rising, you want to lock yourself in as soon as possible. However, the longer your lock, the higher your upfront cost. On the other hand, if a higher interest rate would wipe out your mortgage approval, you probably want to lock yourself in, even if it costs more.

If you are still floating, keep in close touch with your lender.

Close help

At one time, in this daily article, we provided information about the extra help borrowers can get during the pandemic as they near close.

You can still access all of this information and more in a new, standalone article:

What causes interest rates to rise and fall?

In normal times (not now), mortgage rates are highly dependent on investor expectations. Good economic news tends to be bad for interest rates, as an active economy raises concerns about inflation. Inflation causes fixed income investments like bonds to decline in value and their returns (another way of saying interest rates) to rise.

For example, suppose you bought a $ 1,000 bond two years ago and paid 5% interest ($ 50) every year. (This is called the "coupon rate" or "face value" because you paid $ 1,000 on a $ 1,000 bond and because the interest rate is the same as the one on the bond – 5% in this case).

Your Interest Rate: $ 50 APR / $ 1,000 = 5.0%

When interest rates fall

That's a pretty good price today, so many investors will want to buy it from you. You can sell your $ 1,000 bond for $ 1,200. The buyer receives the same $ 50 a year in interest you received. It's still 5% of the $ 1,000 voucher. However, since he paid more for the bond, his return is less.

Your Buyer's Interest Rate: $ 50 APR / $ 1,200 = 4.2%

The buyer receives an interest rate or a return of only 4.2%. And so, when the demand for bonds increases and bond prices rise, interest rates fall.

When interest rates go up

However, when the economy warms, the inflationary potential makes bonds less attractive. When fewer people want to buy bonds, their prices go down and then interest rates go up.

Imagine you have your $ 1,000 bond but you can't sell it for $ 1,000 because unemployment has fallen and stock prices are rising. You end up with $ 700. The buyer gets the same $ 50 a year in interest, but the return looks like this:

50 USD annual interest / 700 USD = 7.1%

The buyer's interest rate is now just over 7%. Interest rates and returns are not mysterious. You calculate them using simple math.

Mortgage Rates FAQ

What are today's mortgage rates?

Average mortgage rates today are only 2.875% (2.875% APR) for a 30 year conventional fixed rate loan. Of course, your own interest rate is likely to be higher or lower depending on factors such as your down payment, credit rating, loan type, and more.

Are mortgage rates rising or falling?

Mortgage rates have been extremely volatile recently due to the impact of COVID-19 on the US economy. Interest rates fell recently when the Fed announced generally low interest rates for the next two years. However, interest rates could rise again slightly if the number of mortgage applications picks up again or if the economy starts to pick up again.

Mortgage rate method

The mortgage reports receive daily interest rates based on selected criteria from multiple credit partners. We find an average rate and an annual interest rate for each type of loan that we want to show on our chart. Since we calculate a series of average prices, this will give you a better idea of ​​what you might find in the market. We also calculate average interest rates for the same types of loans. For example, FHA was fixed with FHA. The end result is a good snapshot of the daily rates and how they change over time.

Check your new plan (August 12, 2020)

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