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.
January 15, 2021
Current Mortgage Rates and Rate Lock Recommendation
- Today's mortgage rates
|Type of Loan||Rate||APR|
|Conventional 5/1 ARM||3.019%||2.949%|
|Conventional 15-Year Fixed||2.412%||2.505%|
|Conventional 30-Year Fixed||2.815%||2.869%|
|FHA 5/1 ARM||3%||3.488%|
|FHA 15-Year Fixed||2.85%||3.809%|
What Factors Are Moving Mortgage Rates Today?
Mortgage rates today opened mostly lower. We have three releases today to digest.
December's Industrial Production report measures output at U.S. factories, mines, and utilities, another indication of manufacturing sector strength or weakness. Analysts anticipated an increase in production of 0.4% from November's level. The actual increase was 1.6%, which is nice for the economy but bad for mortgage rates.
The preliminary reading for the University of Michigan Consumer Sentiment measures consumer willingness to spend. Forecasters are calling for a reading of 80.0, down from November's 80.7. The real number was lower at 79.2, and that's good for mortgage rates.
December’s Retail Sales report tracks consumer spending, which makes up over two-thirds of the U.S. economy. Economists predicted a 0.1% decline in sales and the actual figure was much lower — a .7% decline. That's bad for the economy but good for mortgage rates.
Finally, we have the ongoing turmoil surrounding the baseless claims that President Trump won the election and the continuing efforts of his base to disrupt the transition to President-elect Biden. Fears of further bloodshed are not exactly calming financial markets right now, and that's keeping mortgage rates low.
Today’s Rate Lock Recommendation
Mortgage rates opened lower this morning, and financial data point to lower interest rates. In addition, Friday is not normally the best day to lock because lenders tend to price conservatively before long weekends (Monday is Martin Luther King Day). If you need to float a day or two to get into a lower pricing tier (for example, a 30-day lock instead of a 45-day lock) you can probably do so safely.
Locking isn't a no-brainer because locking a loan costs money. The interest rate you'll get with a 7-day lock is lower than that of a 15-day lock, and so on. Locks longer than 30 days often come with upfront fees (.5% is typical for 45 days). So, the decision to lock is a balancing act; when you lock, you're betting that rates won't fall before you close and that you'll close before your lock expires. Your decision depends on your tolerance for risk.
Rate Lock Recommendation
Lock your rates if your closing date is within:
- 7-day closing
- 15-day closing
Float your rates if your closing date is within:
- 30-day closing
- 45-day closing
- 60-day closing
Economic Data Affecting Today’s Mortgage Rates
Current financial data are favorable for mortgage rates. Here are the numbers influencing mortgage rates today:
All three major US stock indexes opened lower this morning. 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 interest rate remained unchanged at 1.10%. Yields on 10-year Treasuries usually move in the same direction as mortgage rates, and this change is neutral for mortgage rates.
This morning's oil price fell $.66 to $52.09 per barrel. This is good for mortgage rates. Oil is a limited resource required for most economic activity in the US. Rising oil prices trigger fears of inflation and this often causes interest rates to rise, while falling oil prices have the opposite effect.
This morning’s gold price fell $14 to $1832 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 bad 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 fall. This morning's index dropped 1 point to a "greedy" 67. 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 six economic announcements, including two very important reports, plus a couple of Treasury auctions that could push mortgage rates during afternoon trading those days.
|Day of the Week||Upcoming Release|
|Monday||No releases scheduled.|
|Tuesday||No releases are scheduled. However, there will be a 10-year Treasury Note auction. If the sale sees strong demand from investors, bond prices would rise and interest rates would fall. But weak demand would trigger lower prices and higher interest rates.|
|Wednesday||December's Consumer Price Index (CPI) quantifies inflationary pressures on consumers. The overall index is expected to rise by 0.4% while the more important core data is predicted to increase by 0.1%. Weaker than expected numbers would be good for mortgage rates, indicating that inflation is softer than expected and should lead to bond strength and lower mortgage rates Wednesday morning. The Federal Reserve will also conclude its monthly meeting and release its Beige Book. This report covers economic conditions in the U.S. and investors watch it closely because its content can impact financial markets and mortgage rates.|
|Thursday||The weekly unemployment numbers are the only release, and they are not widely considered that important because weekly numbers can be pretty volatile. However, they can move markets if actual numbers vary widely from expectations. Experts are predicting 825,000 new claims for unemployment benefits. More would be good for mortgage rates while fewer would be bad.|
|Friday||December's Producer Price Index (PPI) is a similar release to Wednesday’s CPI but measures inflation at the manufacturing level of the economy. Economists anticipate a 0.3% rise in the overall reading and a 0.2% rise in the core reading. A larger than expected increase in the core reading could mean higher mortgage rates since strengthening inflation is bad news for the bond market. December's Industrial Production report measures output at U.S. factories, mines and utilities, another indication of manufacturing sector strength or weakness. Analysts anticipate an increase in production of 0.4% from November's level. A decline would be good news for mortgage rates, while a stronger reading would likely cause mortgage rates to rise. The preliminary reading for the University of Michigan Consumer Sentiment measures consumer willingness to spend. Forecasters are calling for a reading of 80.0, down from November's 80.7. Lower numbers would be good for mortgage rates, while a higher number would be bad. December’s Retail Sales report tracks consumer spending, which makes up over two-thirds of the U.S. economy. Economists predict a 0.1% decline in sales. Softer numbers would be good for mortgage rates, while better sales would be bad news for mortgage borrowers.|
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 retaining their principal. So demand for safe investments like bonds increases, driving their prices up and interest rates down. The example below illustrates this.
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." If you buy a $1,000 bond paying 5%, your actual yield would be the same as the 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 like 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. Events that signal economic heating and possible inflation cause the 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 the upward and downward interest rate movements in response to economic conditions.
When Interest Rates Fall
Suppose that after you purchase your bond, 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.