Mortgage charges at present, August 18, 2020, plus blocking suggestions

Forecast plus today's mortgage rates

Average mortgage rates finally fell a little yesterday. It wasn't enough to make up for several days of ascent, including some sharp ones. But it was welcome anyway. Traditional loans today start at 3.25% (3.25% APR) for a 30-year fixed-rate mortgage.

This decline could be due to the markets that were subdued yesterday. But one major factor was likely lenders' decision that they adequately priced in the Federal Housing Agency's actions over the past week. For more information, see “The FHFA Debacle” below.

Find and block current rates. (August 18, 2020)

Conventional 30 years
+ 0.38%
Conventional 15 years fixed
Conventional 5 year old ARM
Fixed FTA for 30 years
Fixed FTA for 15 years
5 years ARM FHA
30 years permanent VA
15 years fixed VA
5 years ARM VA
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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 impact of Coronavirus on your home loan, click here.

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Market data that will (or may not) affect today's mortgage rates

Are mortgage rates getting closer to the markets they traditionally follow? It's certainly an inconsistent relationship that is being confused by the Federal Reserve's interventions behind the scenes. This is currently buying mortgage bonds and thus has an invisible effect on interest rates.

And there is always the possibility that a one-off event from the wall will mess up the best-calibrated calculations. like happened last Thursday and Friday.

But if you still want to orient yourself by the markets, it looked like that again this morning unsure for mortgage rates today. Why? On the one hand, investors are still affected by US-China trade as Huawei is once again targeted by the White House. On the flip side, the S&P 500 was the first to hit a record high.

The payment

Here the current status from this morning is at over 9:50 am (ET). The data compared to about the same time yesterday were:

The 10-year Treasury yield reduced from 0.69% to 0.68%. (Good 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 modestly 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
Oil prices rose from $ 42.16 to $ 42.30 per barrel (Neutral for mortgage rates * because energy prices play a huge role in creating inflation and also indicate future economic activity.)
Gold prices rose from $ 1,978 per ounce to $ 2,021. (Well 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 jumped from 65 out of 100 possible points to 73. (Bad 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 may still want to lock on days when prices 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. And separately, persistent bad news about COVID-19 could have a similar effect on markets. (Read on to read the economists' predictions.) However, you can expect bad spots when they rise.

Equally important is that the coronavirus has created massive uncertainty – 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.

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Important information about today's mortgage rates

The FHFA debacle

This is the story behind the sharp rise in mortgage rates last Thursday and Friday. If you are planning to refinance a Fannie Mae or Freddie Mac sponsored loan, you may have to pay more for the privilege. Because the Federal Housing Agency, which regulates the two companies, has just imposed new, additional closing costs.

Unless your loan ends before the end of this month, the FHFA will pay you an additional 0.5% of the loan amount to supposedly cover the additional market risk. A $ 200,000 loan increases your closing cost by $ 1,000 (divide your loan amount by 200).

However, if you've already completed your refinancing, it might be the lender who takes care of the tab. However, mortgage banks often work with wafer-thin margins. So they passed the cost – through higher mortgage rates – on to new applicants (and those who are not yet locked) on all types of mortgages. Hence the all-round higher mortgage interest rates on the last two days of the last working week.

The industry is in the poor. And on August 13th, around 20 bodies signed a joint declaration condemning the FHFA's move. The signatories ranged from the American Bankers Association to the Center for Responsible Lending to the Mortgage Bankers Association and the National Fair Housing Alliance. If the federal agency gives in, interest rates could fall sharply again.

The rate you actually get

Of course, few purchases or refinances qualify for the lowest interest rates found in some media and lender ads. These are usually 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 in which you buy can affect your rate.

Before locking, however, anyone who buys or refinances can usually 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 complete the 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 strive to 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 part of the forces that sometimes affect mortgage rates. So nothing is insured.

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

Higher rates to deter demand

We can see a repeat of a phenomenon that occurred earlier this year. In this case, the lender's offices are so overwhelmed by the demand for mortgages and refinancing that they cannot handle them.

Combine this with logistical issues as many employees are working from home due to the pandemic and you can see that some lenders may face an administrative breakdown.

In an attempt to deter some of the excessive demand, these lenders can artificially increase the interest rates they are offering. This is the only way they can prevent their employees from drowning in paperwork and the equivalent of the digital age.

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 of all, 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 they are released.

Definitely rely 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 Mortgage Bankers Association (MBA) each have a team of economists dedicated to monitoring and forecasting the impact on the economy, housing and mortgage rates.

The payment

And here are their latest predictions for the average rate on a 30 year fixed-rate mortgage in each quarter (Q1, Q2 …) of 2020. Fannie updated his forecasts yesterday and the MBA updated them on July 15th. Freddie & # 39; s, that is, a quarterly report was published in mid-June.

Fannie Mae
Freddie Mac

Yesterday's update from Fannie included a forecast of an average rate of 2.9% for the fourth quarter of this year. This was the first time that we received a forecast for a rate below 3.0% in 2020 from any of these organizations.

Of course, none of these quarterly forecasts rule out daily or weekly averages that are lower than what they suggest over a quarter. Finally, quarterly averages can have some pretty sharp differences between highs and lows.

Fannie was a bit more optimistic about interest rates in its August forecast, as was the MBA in its July forecast. 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.


The gap between forecasts is real and increases the further forecasters look ahead. Hence, Fannie now expects that rate to average 2.8% in the first quarter of next year and drop to 2.7% in the second half.

Freddie is reckoning with 3.2% this year. And the MBA assumes that it will be 3.4% again 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 Freddie Mac's 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.

Harder to get mortgages

The mortgage market is very chaotic right now. And some lenders offer significantly lower interest rates than others. When you borrow large amounts, 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 (move down) the worse the economic outlook. Where the economy is now and where it might go is relevant to rate watchers.

The President's Economic Announcements

To break the partisan congestion in Congress, President Donald Trump signed a series of executive orders and memoranda on August 8. These should provide an economic incentive to counter the effects of the coronavirus pandemic.

Some hoped the president's initiative could be a catalyst for lawmakers on Capitol Hill who failed to come up with a more sustainable stimulus package of their own. But no. The Senate is now on break until the beginning of September.

The effects of the executive orders are not yet clear. There are certainly many practical, and possibly legal, hurdles to overcome before they can produce tangible benefits.

Stimulate an urgent need

The threats to the economy posed by the current congressional deadlock 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 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.

Equally important, some economists caution that waning federal benefits could hurt 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 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 expenditure contributed 67.1% to total gross domestic product in the second quarter of 2020. You might think that getting rid of the now expired $ 600 weekly unemployment benefit is likely to hit this hard.

Even ignoring human misery, political paralysis could prove costly to the economy. Meanwhile, on August 8, a small business aid program expired.

COVID-19 is still a major threat

The COVID-19 pandemic and its economic impact are currently the biggest impact on the markets. And the trends in new infections and deaths look encouraging.

However, there are still many states, cities, areas, and neighborhoods that are hotspots with increasing infections and deaths. And we haven't seen any shocking numbers yet. The national death toll last Wednesday was the highest in a single day since mid-May. And on August 8th, we saw that the total number of infections exceeded 5 million.

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. There are currently great concerns about trade and external relations with China.

As the Financial Times suggested on July 24th:

Tensions between the world's two superpowers have soared to the most dangerous levels in decades when the coronavirus pandemic in the US 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. China last Monday announced sanctions against a number of US officials, including Senators Cruz and Rubio.

Meanwhile, the US-China trade talks scheduled for the weekend have been postponed at the last minute.

Domestic threat

The main 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 places are still recording a terrifying number 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 – New unemployment insurance claims last week were 963,000, significantly better than the 1.19 million the previous week. But that was the first time in 20 weeks that they had fallen below the million mark. And all those numbers would have been unthinkably high at the beginning of this year

The first official estimate of the 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 over those three months was about 9.5%

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

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 need to cheer up after all this? The Federal Reserve Bank of Atlanta’s BIPnow readings suggest we could see 26.2% growth in the third quarter, according to an August 14 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 is still time for the economy to fall behind if further lockdowns are required or if federal benefits – whether those announced by the president or a later congressional package – take a long time to implement.

Even so, we could see a light at the end of this pitch-dark tunnel.

The markets don't seem 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 bubble that can only cause more pain if it bursts.

Over the weekend, CNN Business quoted two analysts with such concerns. First up was FactSet analyst Marc Evans, who covered the S&P 500 index:

The earnings of the companies that make up this index fell nearly 34% in the second quarter. That was the worst drop in five years
The sales of these companies fell by almost 9%. This was the worst drop in nearly four years.
Evans now expects these companies' earnings to fall nearly 19% in 2020, far worse than the 1.2% expected in March

The second analyst on the CNN report was Barry Bannister, head of institutional equity strategy at Stifel. He believes the S&P 500 could be overvalued by up to 10% right now. And CNN Business said:

Bannister fears investors are underestimating the risk of another spike in coronavirus cases, which will result in more damage to the job market and earnings growth later this year. He also believes that earnings estimates for 2021 are too high and need to be revised downwards.

Economic reports this week

After a few eventful weeks we have a quiet time ahead of us. And here it is.

In fact, the report most likely to move the markets is Thursday's weekly unemployment figure, which used to be released so frequently that we didn't report it.

However, the minutes of the last meeting of the Federal Open Market Committee (FOMC) will be released on Wednesday. This is the Federal Reserve Policy Committee that sets the interest rates. And investors have always pondered these minutes, hoping to guess something more than was said in the report that immediately followed the actual meeting and press conference that followed.

Forecasts are important

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

This is because the markets tend to evaluate the analysts' consensus predictions (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 Housing begins (actually 1.496 million *; forecast 1.252 million) and Building permit (actual 1.495 million *; forecast 1.333 million)

Wednesday: No reports. But the FOMC minutes will be published at 2 p.m. (ET)

Thursday: Weekly new unemployment claims by August 15 (forecast 910,000 new unemployment insurance claims)

Friday: July Inventory sales (forecast 5.5 million *)

* These numbers are seasonally adjusted annual rates (SAARs)

Chances are, this week's reports on Wall Street will hardly cause a yawn.

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 seems to be mostly on the ball (although the surge since the start of its interventions has shown the limits of its power). 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.

So I propose a 15 day cutoff. In my opinion, this optimizes your chances of riding inclines 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 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 continue to watch mortgage rates closely.

When should you 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 destroy your mortgage approval. As you refinance it becomes less critical and you can potentially play and hover.

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 wiped 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 on 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 assets like bonds to decline in value and their returns (another way of saying interest rates) to rise.

For example, let's say 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 per year in interest that 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 a mystery. 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 easily rise again 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 interest rates based on selected criteria from multiple credit partners on a daily basis. 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 charge a range of rates, it 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.

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