Forecast plus today's mortgage rates
Average mortgage rates fell noticeably yesterday. And that means another new all-time low has been reached. Traditional loans start today at 2.625% (2.625% APR) for a 30 year fixed rate mortgage. More amazingly low numbers can be found in the table below.
What's happening? Well, last fall was almost certainly due to investors' concerns about the failure of Washington DC politicians. Legislators and the administration were unable to find a replacement for the pandemic stimulus package that passed last week. See below, "Politics is a Growing Problem."
Find and block current rates. (August 6, 2020)
Conventional 30 year fixed
Conventional 15 year fixed
Conventional 5-year ARM
Fixed FHA for 30 years
FHA for 15 years
5 years ARM FHA
VA for 30 years
15 years fixed VA
5 years ARM VA
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• COVID-19 Mortgage Updates: Lenders change rates and rules based on 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 worse for mortgage rates today. Why? Because investors are hearing reports that there may be early agreement on a new coronavirus relief measure on Capitol Hill. We have to wait and see if it stays that way.
Here is the current status from this morning around 9:50 a.m. (ET). The data, compared to approximately the same time yesterday morning, was:
The Yield on 10 year Treasuries rose from 0.52% to 0.54%. (Bad for mortgage rates.) Mortgage rates tend to follow these special government bond yields more than any other market, though more recently
Major stock indices were higher. (Bad 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
Oil prices rose from $ 40.60 to $ 43.16 a barrel (Bad for mortgage rates * because energy prices play a big role in creating inflation and also point to future economic activities.)
Gold prices rose from $ 1,990 an ounce to $ 2,058 (a record high). (Well 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 rose from 68 out of a possible 100 points to 71. (Bad 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 further in the coming weeks, although 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. Locking or floating is a game of chance in both cases.
Important notes on today's mortgage rates
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 influence some of the forces that sometimes affect mortgage rates. So nothing is insured.
Read “Exceptionally, the Fed has an impact on 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 was 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 price mechanism affects 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.
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.
Therefore, none of the forecasters expect a quarterly average below the 3.0% mark this year. Of course, this does not exclude 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 increases the further the forecasters look ahead. As a result, Fannie now expects this rate to average 2.9% in the first half of next year and to 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, many have restricted their loans. 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.
From time to time
There is a tension between the currently published economic data and what appears to be happening in the real world. Part of this can be explained by the delay between actual economic activity and the compilation and publication of the figures that report it.
Current data therefore measure performance at a time when many states have been reopened. At the time, it was hoped that the pandemic would fade. Things seem to be different now, with some states pausing or reversing their easing of anti-COVID 19 restrictions. And that will certainly have an economic impact.
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 meeting of its political committee (the Federal Open Market Committee or 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 said in a statement: "The path of the economy will depend heavily 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
30 million Americans are currently applying for unemployment benefits. And a recent study by the Census Bureau found that more than one in ten US households said they didn't have enough food.
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.
The most obvious thing is that landlords may not receive their rents and will have to go at the expense of vacating tenants and finding new tenants. And lenders (those who offer credit cards, personal loans, auto loans, student loans, etc., as well as mortgages) could experience defaults, redemptions, and foreclosures, even among landlords who have lost tenants.
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. This morning, investors were fueled by speculation that a deal between the parties on Capitol Hill was approaching, according to CNBC. We still have to find the source of these rumors.
COVID-19 is still a major threat
This pandemic is currently the biggest impact on the markets. Finally, there may be some good news in the numbers. Since last Friday, the New York Times reports that the change in the number of new infections in the past 14 days is now negative: -11% yesterday. Of course, the actual numbers are still appalling, and 53,440 Americans were newly diagnosed yesterday. Recently, however, there have been consistently over 60,000.
Unfortunately, the deaths remain at a terrible level. Yesterday's number has risen sharply, possibly due to problems with weekend recording. It was 1,358. And the 14-day change for deaths is + 33%. We can only hope that these will soon reach a plateau as there are already new infections.
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 that's the way 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 24:
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.
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. The new entitlement to unemployment insurance last Thursday was 1.43 million in the previous week, an unthinkable number at the beginning of the year
The first official gross domestic product estimate last week 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%
On June 1, the Congressional Budget Office reduced its expectations for U.S. growth between 2020 and 2030. Compared to its forecast in January, the CBO now expects America to miss $ 7.9 trillion in growth this decade becomes
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 data suggests we could see 19.6% growth in the third quarter, according to an August 3 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 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. Friday brings by far the most important thing: the official monthly employment report.
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 (indeed 58.1%; Forecast 55.0%). plus ADP employment report (indeed 167,000 new private sector jobs; no forecast)
Thursday: weekly new unemployed claims until August 1 (forecast 1.40 million new claims for unemployment insurance)
Friday: July Employment reportfull non-agricultural pay slips (Forecast 1.75 million additional jobs), Unemployment rate (Forecast 10.5%) and average hourly wage (Forecast -0.5%)
This week is all about employment. But watch out for these ISM reports.
Rate lock recommendation
The basis for my suggestion
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 an eye on mortgage rates.
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.
Until recently, in this daily article, we have provided information about the additional help borrowers can receive during the pandemic as they near the end.
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 interest rate today is only 2.625% (2.625% 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 interest rates daily from multiple credit partners based on selected criteria. 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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