Check here daily if you have a mortgage in process or are shopping for a home loan. You’ll see what economic data and financial reports are affecting mortgage rates today before deciding to lock or float your mortgage rate.
October 27, 2020
Current Mortgage Rates and Rate Lock Recommendation
- Today's mortgage rates
|Type of Loan||Rate||APR|
|Conventional 5/1 ARM||2.929%||3.052%|
|Conventional 15-Year Fixed||2.54%||2.637%|
|Conventional 30-Year Fixed||2.842%||2.9%|
|FHA 5/1 ARM||3%||3.466%|
|FHA 15-Year Fixed||2.462%||3.496%|
What Factors Are Moving Mortgage Rates Today?
Mortgage rates today opened mostly lower this morning. The steep rise in coronavirus cases and the Senate failing to pass any coronavirus stimulus before adjourning today are making investors jittery. This mood is pushing mortgage-backed securities and bond prices up and pulling interest rates lower — despite favorable economic news releases.
The Consumer Confidence Index from The Conference Board measures consumer willingness to spend. Analysts expected it to remain unchanged at 101.8, and the index nearly met expectations, coming in at a slightly lower 100.9. That's slightly good for mortgage rates.
A more important report, September’s Durable Goods Orders, tracks big-ticket purchases like automobiles, boats, and planes, and indicates economic strength or weakness. Analysts had predicted a .2% decrease in orders, but the report delivered a 1.9% increase. That's great news for the economy but bad news for mortgage rates. However, this report did not have its usual effect.
Coronavirus and election news have taken over and are having the biggest impact on today's mortgage rates.
Today’s Rate Lock Recommendation
Mortgage rates are on the move and the long-term trend is upward. However, economic uncertainty before the US election and the exploding number of coronavirus cases is causing investors to be skittish, and mortgage rates have benefitted in the last two days. This may provide a valuable opportunity to lock in before the economy catches a gear and rates rise.
If you need to float a day or two to get into a better pricing tier (for example, a 15-day lock instead of a 30-day lock), you can probably do so safely. However, keep a close eye on rates and stay in contact with your lender. Positive developments for coronavirus treatments, testing, or prevention could lead to higher mortgage rates, while evidence of rising disease and economic turmoil could trigger lower rates. Similarly, election-related news could lead to instability (good for rates) or economic confidence (bad for rates).
Rate Lock Recommendation
Lock your rates if your closing date is within:
- 7-day closing
Float your rates if your closing date is within:
- 15-day closing
- 30-day closing
- 45-day closing
- 60-day closing
Economic Data Affecting Today’s Mortgage Rates
This morning's financial data mostly point to lower mortgage rates. Here are the numbers influencing mortgage rates today:
Major stock indexes are lower this morning than yesterday's opening. Stock market prices are fairly good predictors of interest rates. When stocks increase, the economy is heating up. This usually leads to higher mortgage and other interest rates. Falling stock prices normally correlate with lower interest rates. This morning's pricing is good for mortgage rates.
The 10-year Treasury yield fell by 3 basis points (4/100ths of 1%) to .78%. And that's after dropping 4 basis points yesterday. Yields on 10-year Treasuries usually move in the same direction as mortgage rates, and this change is good for mortgage rates.
This morning's oil prices rose by $.95 to $39.35 per barrel. That's bad for mortgage rates. Oil is a limited resource required for most economic activity in the US. Rising oil prices trigger fears of inflation and often causes interest rates to rise while falling oil prices have the opposite effect.
This morning’s gold prices edged $6 higher to $1,914 per ounce. Increasing gold prices often go in tandem with lower interest rates, but rates often rise as gold prices fall. Today's movement is good for mortgage rates.
CNNMoney’s Fear & Greed Index measures investor sentiment with a variety of metrics. When investors are confident, or “greedy,” mortgage rates tend to increase. And when investors become more “fearful,” interest rates tend to fall. This morning’s index plunged 10 points (after falling 7 points yesterday!) to a "neutral" 50. The scope and direction of this movement are good for mortgage rates.
Almost anything that impacts the world economy can cause mortgage interest rates to change. In most cases, news that indicates economic weakening is good for mortgage rates. Investors switch to safer investments like Treasuries or mortgage-backed securities (MBS) and are willing to accept lower returns in exchange for safety.
News that suggests economic strengthening is generally bad for mortgage rates. This is because economic heat can also cause fears of inflation. Investors then demand higher interest rates to compensate for inflationary risk, because no one wants to be earning 3% in a 4% world.
This Week’s Upcoming Releases
This week brings us the release of several economic reports that may impact mortgage rates. In addition, a large number of big companies will release their quarterly and annual earnings reports. Strong earnings are good news for stocks and bad news for bonds and mortgage-backed securities (MBS). Typically, if earnings miss expectations, bond prices should rise and mortgage rates should fall.
|Day of the Week||Upcoming Release|
|Monday||September's New Home Sales data from the Commerce Department is predicted to show an increase to a 1.33 million annualized rate of sales. It will take a significant variance from this prediction to change mortgage rates much.|
|Tuesday||The Consumer Confidence Index from The Conference Board measures consumer willingness to spend. Analysts expect it to remain unchanged at 101.8. Consumer spending makes up over two-thirds of our economy, so this is important — a higher reading could cause mortgage rates to rise, while a decrease could cause them to fall. September’s Durable Goods Orders tracks big-ticket purchases like automobiles, boats, and planes, and indicates economic strength or weakness. Analysts have predicted a .2% decrease in orders. A larger decrease would be good for mortgage rates, while an increase would cause rates to rise.|
|Wednesday||No releases this week.|
|Thursday||The preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) is the primary measurement of economic growth — the total of all goods and services produced in the U.S. Forecasters believe that the GDP will have rebounded from the pandemic shutdown at an annual rate of 32.7% during the July through September months. A much smaller increase could cause mortgage rates to fall. A much larger than expected increase could lead to a rally in stocks and higher mortgage rates.|
|Friday||September's Personal Income and Outlays tracks consumer earnings and spending as well as inflation. Rising income and spending is bad news for the bond market and mortgage rates because it raises inflation concerns. Analysts are expecting to see a 0.5% increase in income and a 1.1% rise in spending and a core inflation rate of .2%. Smaller than expected increases would be good for mortgage pricing. The University of Michigan Index of Consumer Sentiment for October measures consumer confidence and willingness to spend. Experts predict a reading of 81.2, up from September's 80.4. A lower reading would be good for mortgage rates, while a higher number could cause rates to increase.|
Why Do Mortgage Rates Change?
In general, positive economic news causes interest rates (including mortgage rates) to increase. That’s because an expanding economy can increase the rate of inflation, and investors demand higher returns when they are concerned about inflation. When the economy is shaky, investors become less worried about how much their money earns and more worried about losing it. So demand for safe investments like bonds increases, driving their prices up and interest rates down.
How Bonds Work
Bond issuers create bonds paying a specific interest rate at a predetermined price, called "par." Par pricing is normally $1,000 for a $1,000 bond, and the interest rate for that bond is called the "coupon rate." For a $1,000 bond paying 5%, the actual yield would be the same as its coupon rate.
Your interest rate: $50 interest / $1,000 bond price = 5%
But bonds don't stay at par pricing - they are subject to market supply and demand just likes shares of stock are, and their price can rise and fall all day long. These price movements are triggered by events that impact the global economy. Happenings that signal economic heating and possible inflation cause demand for bonds to fall and rates to increase. While events that indicate economic instability or failure push investors into safe havens like bonds. Demand for these instruments causes their prices to rise and rates to fall. The examples below illustrate upward and downward interest rate movements.
When Interest Rates Fall
After you purchase your bond, though the economy becomes troubled. Perhaps by political instability or a global pandemic. Investor demand for safe places to put their money skyrockets and 5% becomes highly desirable. You sell your $1,000 bond to an investor for $1,500. The buyer gets the same $50 a year in interest that you were getting. It’s still 5% of the $1,000 coupon. However, the yield drops.
Your buyer’s interest rate: $50 annual interest / $1,500 bond price = 3.33%
When Interest Rates Rise
The opposite occurs when the economy improves. Suppose that after you purchased your $1,000 bond, the pandemic is resolved with the invention of a vaccine, and threats of war subside in volatile countries. The stock market is taking off and 5% doesn’t look so great anymore. Investor demand falls for your bond and you can only sell it for $750. The buyer pays less and enjoys a higher yield.
Your buyer’s interest rate: $50 annual interest / $750 bond price = 6.67%
The relationship between bond prices and interest rates is predictable. It’s simple math.