What’s Driving Mortgage Rates Today?
February’s New Home Sales from the Commerce Department tracks a much smaller percentage of home sales than Wednesday’s report covers, so it’s less important for mortgage rates today. Experts believe the report will show a small increase from 555,000 to 571,000.
Click to see today’s rates (Mar 23rd, 2017)
Unemployment Claims Unexpectedly Higher
We also get the weekly Unemployment Claims, but that report only tracks a week’s worth of new claims for benefits. Today’s report was expected to come in with 240,000 new claims, down 1,000 from last week’s 241,000 claims.
However, we did get a sizable jump over last week’s figures and this week’s expectations. In the week ending March 18, the advance figure for seasonally adjusted initial claims was 258,000, an 18,000 more than expected. That’s good for mortgage rates.
Trump Slump Continues?
CNNMoney’s Fear & Greed Index has planted itself solidly into Fear territory. Just a month ago, before the so-called “Trump Slump” took hold, investors’ moods were entirely different — in “Extreme Greed.”
The Fear & Greed Index consists of a series of metrics designed to capture investor sentiment. “Greedier” investors invest more aggressively, and stock prices tend to rise. Consequently, so do mortgage rates. The more fearful investors prefer safe havens like bonds and mortgage-backed securities (MBS), pushing up their prices and interest rates down.
All of these indicators point o continuing drops in long-term interest rates in the near-term.
However, Fed Chair Janet Yellen is expected to give a speech today that is widely anticipated to be positive for the economy and may boost stocks and burst bonds — reversing some of the Trump Slump and causing bond prices to pull back. If locking today, I’d do it fast.
Today’s Mortgage Rates
** FHA APRs include government-mandated mortgage insurance premiums (MIP).
These rates are averages, and your rate could be lower.
Request a personalized quote from a licensed, reputable lender here.
Tomorrow
Tomorrow brings us a fairly important report — Durable Goods orders for February. Experts predict that this indicator of demand for high-ticket orders and items expected to last three or more years will have have fallen by 1.6 percent. That’s a modest setback for the US economy. However, this would be good news for mortgage interest rates. A larger drop would be even better,
Rate Lock Recommendation
This is a good time to take advantage of the drop in pricing. I recommend locking ASAP this morning before Yellen’s speech positively impacts the stocks and negatively affects mortgage rates today.
Note that this is what I would do if I had a mortgage in process today. Your own goals and tolerance for risk may differ.
What Causes Rates To Rise And Fall?
Mortgage interest rates depend on a great deal on the expectations of investors. Good economic news tends to be bad for interest rates, because an active economy raises concerns about inflation. Inflation causes fixed-income investments like bonds to lose value, and that causes their yields (another way of saying interest rates) to increase.
For example, suppose that two years ago, you bought a $1,000 bond paying five percent interest ($50) each year. (This is called its “coupon rate.”) That’s a pretty good rate today, so lots of investors want to buy it from you. You sell your $1,000 bond for $1,200.
When Rates Fall
The buyer gets the same $50 a year in interest that you were getting. However, because he paid more for the bond, his interest rate is not five percent.
- Your interest rate: $50 annual interest / $1,000 = 5.0%
- Your buyer’s interest rate: $50 annual interest / $1,200 = 4.2%
Your buyer gets an interest rate, or yield, of only 4.2 percent. And that’s why, when demand for bonds increases and bond prices go up, interest rates go down.
When Rates Rise
However, when the economy heats up, the potential for inflation makes bonds less appealing. With fewer people wanting to buy bonds, their prices decrease, and then interest rates go up.
Imagine that you have your $1,000 bond, but you can’t sell it for $1,000, because unemployment has dropped and stock prices are soaring. You end up getting $700. The buyer gets the same $50 a year in interest, but the yield looks like this:
- $50 annual interest / $700 = 7.1% The buyer’s interest rate is now slightly more than seven percent.
Click to see today’s rates (Mar 23rd, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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