Forecast plus today's mortgage rates
Average mortgage rates fell again yesterday. So you are as close as possible to Tuesday's new all-time low without actually hitting it. FHA loans start today at 2.25% (3.226% APR) for a 30 year fixed rate mortgage.
It would be no surprise if these rates continued to rise and fall within a narrow range until politicians cobbled together a coronavirus aid package – or until there is some crucial good or bad news about COVID-19. But it's only possible for another piece of news (China?) To gain traction and create some momentum. The higher than expected employment numbers this morning only gave the markets a brief boost.
Find and block current rates. (August 7, 2020)
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• COVID-19 Mortgage Updates: Mortgage lenders are changing interest rates and rules due to COVID-19. For the latest information on the effects of coronavirus on your home loan, click here.
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Market data that affects (or doesn't) today's mortgage rates
Are mortgage rates closer to 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 search OK for mortgage rates today. Why? This morning's employment data was better than expected and spiced up investors – but only briefly.
Here is the current status from this morning around 9:50 a.m. (ET). The dates compared to yesterday at 11 a.m. were:
The 10-year Treasury yield increased from 0.51% to 0.53%. (Bad for mortgage rates.More than any other market, mortgage rates usually tend to follow these particular government bond yields, albeit more recently
Major stock indices were modestly lower. (Good for mortgage Prices.) When investors buy stocks, they often sell bonds, which pushes down the prices of those stocks and increases yields and mortgage rates. The opposite happens when the indices are lower
The oil price fell from $ 42.26 to $ 41.45 per barrel (Good for mortgage rates * because energy prices play a big role in creating inflation and also point to future economic activities.)
Gold prices fell from $ 2,071 an ounce to $ 2,059. (Bad for mortgage rates *.) In general, it is better for interest rates if gold goes up, and worse if gold goes down. Gold tends to rise when investors are worried about the economy. And worried investors tend to cut interest rates.
CNN Business Fear & Greed Index dropped from 73 out of 100 possible points to 71. (Good for mortgage rates.) "Greedy" investors push bond prices down (and interest rates up) when they leave the bond market and invest in stocks, while "fearful" investors do the opposite. So lower readings are better than higher ones
* A change of a few dollars in the price of gold or a question of the cent in the price of oil is a fraction of 1%. Therefore, we only count significant differences in mortgage rates as good or bad.
Guide to valuation locks
My recommendation reflects the success of the Fed's efforts to keep interest rates low. I personally suggest:
LOCK when you approach 7 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 the 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 the markets. (Read on for the economists' forecasts.) However, you can expect bad spots if they rise.
It is also important that the corona virus has created massive insecurity – and disruptions that can defy all human efforts in the short term, including perhaps that of the Fed. So locking or hovering is a gamble in either case.
Important notes on today's mortgage rates
Freddie Mac's weekly prices
Don't be surprised if Freddie's Thursday reports and ours rarely match. First, the two measure different things: weekly and daily averages.
But Freddie usually only collects data on Mondays and Tuesdays a week. And they are often out of date by the day of publication. So you can rely on Freddie's accuracy over time, but not necessarily every day or week.
The rate you actually get
Of course, few purchases or refinancing 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 blocking, however, anyone who buys or refinances can usually lose if interest rates rise, or win if rates fall.
When the movements are very small, many lenders don't bother to change their price lists. Instead, you may have to pay a little more or less to get compensation.
Overall, we still think it is possible that the Federal Reserve will cut rates further over time. And last Wednesday, the organization confirmed that it plans to continue this policy for as long as it turns out to be necessary. At a press conference, Fed chairman Jay Powell promised:
We use all of our tools to support our economy in this challenging environment.
However, there was a lot going on here before the green shoots of economic recovery became apparent. Now there is more. And, as we've seen, the Fed can only partially influence some of the forces that affect mortgage rates. So nothing is insured.
Read “For once, the Fed is affecting mortgage rates. Here's why you want to examine the key details of this organization's current, temporary role in the mortgage market.
Higher rates to deter demand
A phenomenon that occurred earlier this year may soon repeat itself. 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.
What economists expect from mortgage rates
Mortgage rate forecasts for 2020
The only function of the economic forecast is to make astrology appear respectable. – John Kenneth Galbraith, Harvard economist
Galbraith made clear statements about the economists' forecasts. But there is nothing wrong with taking them into account, seasoned appropriately with a pinch of salt. Who else will we ask when we make financial plans?
Fannie Mae, Freddie Mac and the MBA each have a team of economists dedicated to monitoring and forecasting the impact on the economy, housing and mortgage rates.
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.
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 include some pretty big 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 nobody is sure about a lot, but that wild optimism about the direction of mortgage rates might be out of place.
The gap between the forecasts is real and widening as 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 …
However, all of these forecasts show significantly lower rates this year and next year than in 2019 when, according to Freddie Mac's archives, it averaged 3.94%.
And never forget that last year had the fourth lowest mortgage rate since records started. Better yet, this year could be an all-time low – aside from shocking news. Of course, shocking news is a low bar in 2020.
Mortgages are more difficult to obtain
The mortgage market is currently very chaotic. And some lenders offer significantly lower interest rates than others. If you borrow large amounts, such differences can add up to several thousand dollars within a few years – more with larger loans and over longer periods of time.
Worse still, many have restricted their credit. You may find it more difficult to find a payout refinance, an investment property loan, a jumbo loan, or a mortgage if your credit rating is compromised.
All of this makes it even more important than usual that you purchase your mortgage on a large scale and compare offers from several lenders.
Mortgage rates traditionally improve (decrease) the worse the economic outlook is. Where the economy is now and where it could go is relevant to rate observers.
The Fed's thoughts
However, many were disillusioned with the Federal Reserve's worrying forecasts for economic growth and employment on June 10. These concerns have been reinforced on 1st of July when the minutes of the last session of its Federal Open Market Committee (FOMC) were published. These showed ongoing concerns, including expectations:
Increasing business losses
Depressed consumer spending well into 2021
The real possibility of a double downturn that could undermine a recovery in employment
Last Wednesday, after the FOMC meeting in July, the Fed backed its cautious forecasts. A statement said: "The way the economy goes will depend largely on the course of the virus." And Fed chairman Jay Powell confirmed this message at his subsequent press conference that day.
It's almost as if he's worried that too many investors are not taking the dangers and unpredictability of the pandemic seriously enough.
Politics is a growing issue
A program ended last Friday that provided unemployment benefits of $ 600 a week. And the politicians are still fighting over their replacement.
There may be good ideological and long-term economic reasons for stopping the benefits. In the short term, however, this could impact millions, including those who don't get 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, student loans, etc., and mortgages) could find defaults, redemptions, and foreclosures across broad populations.
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. Monday's Financial Times headline read, "The US economy is at risk with unemployment benefits expiring."
Consumers are the key to the US economy
Do you think the Financial Times is exaggerating? Maybe. However, the US economy depends on consumer spending for its growth.
According to the Federal Reserve Bank of St. Louis, personal consumption spending in the second quarter of 2020 contributed 67.1% to total gross domestic product.
Even disregarding human misery, political paralysis could prove costly to the economy. On Wednesday morning, speculation fueled investors that a deal between the parties on Capitol Hill was nearing, according to CNBC. However, this trust turned out to be wrong.
Meanwhile, a small business aid program expires tomorrow.
COVID-19 is still a major threat
This pandemic is currently the biggest impact on the markets. Finally, there may be a hint of good news in the numbers. Since last Friday, the New York Times reports that the number of new infections has changed negatively in the past 14 days: -16% yesterday. Of course, the actual numbers are still appalling, and 57,128 Americans were newly diagnosed yesterday. Until recently, it was still over 60,000.
Unfortunately, deaths remain at terrible levels. Yesterday the number was 1,036. And the 14-day change for deaths was + 19%. We can only hope that these will soon reach a plateau as there are already new infections. The total number of reported COVID-19 deaths in the US hit 160,000 for the first time in the past few hours.
However, in a virus meeting at the White House on July 21, President Donald Trump warned:
Unfortunately, it will probably get worse before it gets better. Something I don't like to say about things, but it is.
Although the COVID-19 news dominates in general as well as in the markets, there is still room for other concerns. Concerns about trade and external relations with China are currently high.
As the Financial Times suggested on July 24th:
Tensions between the two superpowers of the world have risen to the most dangerous level in decades when the coronavirus pandemic in the United States and Beijing affects Hong Kong's autonomy.
And that was before newer tensions emerged. This includes the president who plays hardball over Tik-Tok and WeChat.
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 seeing an alarming number of new cases and deaths.
Good news is more than welcome, but it can mask the devastation caused by COVID-19 in the economy.
Some concerns that remain are:
We are currently officially in recession
Unemployment is expected to continue to rise for the foreseeable future. Yesterday's new unemployment insurance claims were 1.19 million, significantly better than the 1.43 million the previous week. But it was the 20th consecutive week in which new claims exceeded the one 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 GDPnow values suggest that, according to an August 5 update, we could see growth of 20.3% in the third quarter.
But this is also an annual rate. So it has to be compared to the 32.9% loss in the second quarter. And there is still time for the economy to fall behind if more barriers are required or federal benefits continue to be withdrawn.
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 equity 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. ING International chief economist James Knightley was quoted by CNN Business this weekend as follows:
Given the growing fear of viruses, job losses, and income pressures, we believe the recovery could be much more bumpy than the markets seem to believe, and we expect some data disappointment in the coming months have to.
Economic reports this week
There are some key economic reports this week. Today brings with it by far the most important thing: the official monthly report on the employment situation.
However, there are a few others that sometimes attract investors' attention. These come from the Institute for Supply Management (ISM) and measure the mood of experts in this field. That usually offers a reliable Indication of the economic direction of the manufacturing sector (Monday) and the service sector (Wednesday). The neutral point for this is 50%. The higher above, the better.
This week's other reports don't move markets or mortgage rates far.
Predictions are important
Typically, any economic report can move the markets as long as it contains news that is shockingly good or devastatingly bad – provided that the news is unexpected.
This is because markets tend to evaluate analyst 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 can have a slight immediate impact, provided that this difference is expected and has been taken into account in advance.
This week's calendar
T.His week's calendar of major domestic economic reports includes:
Monday: July ISM manufacturing index (actually 54.2%; forecast 53.6%) and June Construction expenditure (actually -0.7%; forecast + 0.5%)
Wednesday: July ISM Nonmanufacturing (Services) index (actually 58.1%; forecast 55.0%). plus ADP employment report (indeed 167,000 new private sector jobs; no forecast)
Thursday: weekly new unemployed claims by August 1 (1.19 million new unemployment insurance claims; forecast 1.40 million)
Friday: July Employment reportfull non-agricultural pay slips (actually 1.76 million new jobs; forecast 1.68 million), Unemployment rate (actually 10.2%; forecast 10.6%) and average hourly wage (actually + 0.2%; forecast -0.5%)
This week is all about employment.
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, here's a personal assessment of a risk assessment: Do the dangers outweigh the possible 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.
However, this does not mean that there will be no disturbances on the way. It is quite possible that mortgage rates will rise in times when not all of them can be controlled by the Fed.
So I suggest 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 block immediately, almost regardless of when they will close. After all, current mortgage rates are at or near record lows, and much is secured.
On the other hand, risk takers might prefer to take their time and take a chance in the event of future falls. But only you can decide which risk you feel personally comfortable with.
If you are still floating, stay alert until you lock. Make sure your lender is ready to act as soon as you press the button. And keep watching mortgage rates closely.
When should I block anyway?
You may still want to lock your loan if you buy a house and have a higher debt-to-income ratio than most others. In fact, you should tend to lock because rate hikes could void your mortgage approval. Refinancing is less critical and you may be able to play and hover.
If your degree is weeks or months away, the decision to lock or float becomes complicated. If you know interest rates are going up, of course you want to lock yourself in as soon as possible. However, the longer your lock is, the higher your upfront costs will be. 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're still floating, stay in close contact with your lender.
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 depend heavily 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 assets like bonds to lose value and their yields (another way of saying interest rates) to rise.
For example, suppose you bought a $ 1,000 bond two years ago, paying 5% interest ($ 50) each year. (This is called the "Coupon Rate" or "Par Rate" because you paid $ 1,000 for a $ 1,000 bond and because the interest rate is the rate shown 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 rate today, so many investors 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 coupon. However, since he paid more for the bond, his return is lower.
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 that's why interest rates go down as bond demand increases and bond prices rise.
When interest rates go up
However, as the economy warms up, inflation potential makes bonds less attractive. When fewer people want to buy bonds, their prices fall and then interest rates rise.
Imagine that you have your $ 1,000 bond but cannot sell it for $ 1,000 because unemployment has dropped and stock prices are rising. You'll end up with $ 700. The buyer receives the same $ 50 a year in interest, but the return looks like this:
$ 50 APR / $ 700 = 7.1%
The buyer's interest rate is now just over 7%. Interest rates and returns are not mysterious. You calculate them with simple math.
Mortgage Interest FAQ
What are today's mortgage rates?
The average mortgage rate today is only 2.75% (2.75% APR) for a 30-year conventional fixed rate loan. Of course, your own interest rate will likely be higher or lower depending on factors such as your down payment, credit rating, type of loan 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. Interest rates could, however, rise slightly again if the number of mortgage applications increases sharply 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 determine an average rate and an annual interest rate for each loan type that should be shown in our chart. Because we calculate a range of average prices, you get a better idea of what you might find on the market. We also calculate average interest on 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.
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