July 7, 2021
Current Mortgage Rates and Rate Lock Recommendation
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.
- Type of LoanRateAPR
- Conventional 5/1 ARM5.746%5.612%
- Conventional 15-Year Fixed5.515%5.675%
- Conventional 30-Year Fixed6.336%6.431%
- FHA 5/1 ARM4.917%6.77%
- FHA 15-Year Fixed5.604%6.825%
What Factors Are Moving Mortgage Rates Today?
Today’s mortgage rates opened mostly lower, as expected. There are no scheduled economic releases today, and the financial data below are slightly biased in favor of lower mortgage rates.
Today’s Rate Lock Recommendation
Mortgage rates opened mostly lower, carrying some momentum from yesterday. Financial data are stable or slightly favorable; expect this morning's rates to hold or edge slightly lower today.
If you're closing soon, you should probably lock. Interest rates are bumping up and down within a normal range but are rising overall. However, if you need to float for a day or two to get into a cheaper locking tier (a 7-day lock instead of a 15-day lock, for instance), you can probably do so safely. With almost no economic releases scheduled this week, mortgage rates should remain fairly stable.
Locking isn't always a no-brainer for longer periods, even in a rising rate environment, 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 60 days). If you can get a longer lock at a decent cost, you should probably go for it.
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
- >60 days closing
Economic Data Affecting Today’s Mortgage Rates
Today's indicators point to stable or lower rates. Keep an eye on oil prices and the 10-year Treasury yields if you're contemplating a rate lock. Here are the data influencing mortgage rates today:
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 will bring very few economic releases and none of them are terribly important to mortgage rates. We will have to take our cues from movements in financial markets and events like speeches from Federal Reserve Board members.
- Day of the WeekUpcoming Release
- MondayNo reports are scheduled.
- TuesdayNo reports are scheduled.
- WednesdayNo reports are scheduled. However, at 2 PM EDT the Fed will release the minutes from its latest meeting. The minutes and accompanying statement can move markets if they contain any statements that indicate the timing or extent of future interest rate changes.
- ThursdayEconomists expect that this Thursday's weekly unemployment numbers will show that workers filed 350,000 new claims for benefits. More claims would indicate a weaker economy and be good for mortgage rates, while fewer claims would point to economic strength and that could cause rates to rise.
- FridayNo reports are scheduled.
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.
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