Mortgage rates today, July 22, 2020, plus lock recommendations

Forecast plus what’s driving mortgage rates today

Average mortgage rates inched lower yesterday. And that left them immediately adjacent to the all-time low set last week. VA loans today start at 2.25% (2.421% APR) for a 30-year, fixed-rate mortgage.

Should you look to markets (below) to decide your daily lock-or-float decisions? After all, the only other thing influencing these rates is the invisible hand of the Federal Reserve. Well, maybe. But the relationship between 10-year Treasury yields and mortgage rates, which is normally close, is currently off and on. And other markets are even less reliable as guides.

Find and lock current rates. (Jul 22nd, 2020)

• COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

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Market data affecting (or not) today’s mortgage rates

Are mortgage rates again aligning more closely with the markets they traditionally follow? It’s certainly an inconsistent relationship, confused by behind-the-scenes interventions by the Federal Reserve.

But, if you’re ready to take your cue from them, things are looking slightly better for mortgage rates today. That’s because most markets are more cheerful this morning following some positive news about potential COVID-19 vaccines. Also, European Union leaders have agreed an $857 billion stimulus package to counter their coronavirus recession. And good news typically means higher mortgage rates.

The numbers

Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with roughly the same time yesterday morning, were:

• The yield on 10-year Treasurys nudged down to 0.59% from 0.61%. (Good for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
• Major stock indexes were mixed and barely moving. (Neutral for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
• Oil prices fell to $41.30 a barrel from $42.07 (Good for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
• Gold prices climbed to $1,853 from $1,837 an ounce. (Good for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower.
•  CNN Business Fear & Greed index held steady at 67 out of a possible 100 points. (Neutral for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of a few dollars on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Important notes on today’s mortgage rates

The rate you’ll actually get

Naturally, few buying or refinancing will actually qualify for the lowest rates you’ll see bandied around in some media and lender ads. Those are typically available only to people with stellar credit scores, big down payments and robust finances (so-called top-tier borrowers). And, even then, the state in which you’re buying can affect your rate.

Still, prior to locking, everyone buying or refinancing typically stands to lose when rates rise or gain when they fall.

When movements are very small, many lenders don’t bother changing their rate cards. Instead, you might find you have to pay a little more or less on closing in compensation.

The future

Overall, we still think it possible that the Federal Reserve’s going to drive rates even lower over time. However, there was a lot going on here, even before the green shoots of economic recovery began to emerge. There’s even more now. And, as we’ve already seen, the Fed can only influence some of the forces that affect mortgage rates some of the time. So nothing is assured.

Read “For once, the Fed DOES affect mortgage rates. Here’s why” to explore the essential details of that organization’s current, temporary role in the mortgage market.

Freddie Mac’s weekly rates

Don’t be surprised if Freddie’s Thursday rate reports and ours rarely coincide. To start with, the two are measuring different things: weekly and daily averages.

But also, Freddie tends to collect data on only Mondays and Tuesdays each week. And, by publication day, they’re often already out of date. So you can rely on Freddie’s accuracy over time, but not necessarily each day or week.

Rate lock advice

My recommendation reflects the success so far of the Fed’s actions in keeping rates uberlow. I personally suggest:

• LOCK if closing in 7 days
• LOCK if closing in 15 days
• FLOAT if closing in 30 days
• FLOAT if closing in 45 days
• FLOAT if closing in 60 days

But it’s entirely your decision. And you might wish to lock anyway on days when rates are at or near all-time lows.

The Fed may end up pushing down rates even further over the coming weeks, though that’s far from certain. And, separately, continuing bad news about COVID-19 could have a similar effect through markets. (Read on for specialist economists’ forecasts.) But you can expect bad patches when they rise.

As importantly, the coronavirus has created massive uncertainty — and disruption that seems capable of defying in the short term all human efforts, including perhaps the Fed’s. So locking or floating is a gamble either way.

What economists expect for mortgage rates

Mortgage rates forecasts for 2020

The only function of economic forecasting is to make astrology look respectable. — John Kenneth Galbraith, Harvard economist

Galbraith made a telling point about economists’ forecasts. But there’s nothing wrong with taking them into account, appropriately seasoned with a pinch of salt. After all, who else are we going to ask when making financial plans?

Fannie Mae, Freddie Mac and the MBA each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

The numbers

And here are their latest forecasts for the average rate for a 30-year, fixed-rate mortgage during each quarter (Q1, Q2 …) in 2020. Fannie updated its forecasts on July 14 and the MBA refreshed its the following day. Freddie’s, which is now a quarterly report, was published in mid-June.

So none of the forecasters is expecting a quarterly average below the 3.0% mark this year. Of course, that doesn’t exclude daily or weekly averages below that level during any quarter. After all, quarterly averages can include some quite sharp differences between highs and lows.

Both Fannie and the MBA were a bit more optimistic about rates in their July (monthly) forecasts. And that’s leaving Freddie’s June (quarterly) one looking stale.

What should you conclude from all this? That nobody’s sure about much but that wild optimism about the direction of mortgage rates might be misplaced.

Further ahead

The gap between forecasts is real and widens the further ahead forecasters look. So Fannie’s now expecting that rate to average 2.9% through the first half of next year and then inch down to 2.8% for the second half.

Meanwhile, Freddie’s anticipating 3.2% throughout that year. And the MBA thinks it will be back up to 3.4% for the first half of 2021 and 3.5% for the last half. Indeed, the MBA reckons it will average 3.7% during 2022. You pays yer money …

Still, all these forecasts show significantly lower rates this year and next than in 2019, when that particular one averaged 3.94%, according to Freddie Mac’s archives.

And never forget that last year had the fourth-lowest mortgage rates since records began. Better yet, this year may well deliver an all-time annual low — barring shocking news. Of course, shocking news is a low bar in 2020.

Mortgages tougher to get

The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others. When you’re borrowing big sums, such differences can add up to several thousands of dollars over a few years — more on larger loans and over longer periods.

Worse, many have been putting restrictions on their loans. So you might have found it harder to find a cash-out refinance, a loan for an investment property, a jumbo loan — or any mortgage at all if your credit score is damaged.

All this makes it even more important than usual that you shop widely for your mortgage and compare quotes from multiple lenders.

Still, there are signs in studies by Fannie Mae and the MBA that the screw is turning more slowly. And some forecast that a number of lenders will begin to loosen restrictions “soon.”

Economic worries

Mortgage rates traditionally improve (move lower) the worse the economic outlook. So where the economy is now and where it might go are relevant to rate watchers.

Now and later

Employment and retail sales figures (among many others) have been much better than expected over the last month or so.

But many were sobered by the Federal Reserve’s worrying forecasts for economic growth and employment on June 10. And those concerns were reinforced on July 1 when the minutes of the last meeting of its policy committee were published. Those revealed that the Fed expected:

1. Rising business failures
2. Depressed consumer spending well into 2021
3. The real possibility of a double-dip downturn, which could undermine a recovery in employment

On July 6, Goldman Sachs issued warnings about the effects on the nascent recovery of pausing the relaxation of lockdown rules. “The recent declines are minor compared to the collapse in activity in March and April,” said chief economist Jan Hatzius. “But they clearly indicate a break from the steady upward trend since mid-April.”

Results season

Meanwhile, we’re in the early stages of a fresh earnings season, when publicly traded companies publish their quarterly results. Barron’s is predicting this will be “ugly,” while CNN expects it to be “awful.”

Some are especially worried about tech giants being potentially overvalued. And this week sees results released for many of these, including IBM, Microsoft and Intel.

The question is, how much will markets care about any of these figures.?

COVID-19 still a huge threat

The pandemic is the single biggest influence on markets at the moment. And COVID-19-related news continues to be depressing. The 14-day change in new cases across America was +30% yesterday, according to The New York Times.

That’s been trending lower in recent days. Does that mean the tightening of containment measures in some states is working? Maybe.

But infections still rose by 65,512 cases nationwide yesterday, says the Times. In a White House virus briefing yesterday, President Donald Trump said:

It will probably, unfortunately, get worse before it gets better. Something I don’t like saying about things, but that’s the way it is.

Deaths follow infections upward

Until recently, some had been taking comfort because the number of new COVID-19 deaths in the US was falling, even as the infection rate rose. But that’s no longer true as the death rate has resumed its upward path while infections are falling in many places across the country.

The 14-day change in the number of deaths was +48% yesterday, the Times reckons. That’s lower than it has been of late. And yet, there’s no room for complacency. Yesterday, at 1,127, the number of deaths nationwide exceeded 1,000 for the first time. Note the difference between 14-day changes and daily numbers.

Deaths are bound to lag behind new infections. So we should at least hope to see them plateau within weeks — providing new cases don’t begin to climb sharply again.

Non-pandemic news

Although COVID-19 news dominates both generally and in markets, there’s still room for other fears. And concerns over trade are currently elevated.

In particular, China is firmly in the US’s sights over a recent crackdown on human rights in Hong Kong. New sanctions have already been proposed and more may follow. Things escalated yesterday when the administration forced the closure of the Chinese consulate in Houston, TX.

Meanwhile, there’s also been a falling out with some European countries over the taxation of American companies operating there. Some see the US response as saber rattling, as new tariffs levied on certain French goods won’t come into effect for many months.

But at a time of constrained global trade, few businesses will welcome any further restrictions.

Domestic threat

Most important recent economic data have been looking good. But you need to see them in their wider context.

First, they follow disastrous lows. You expect record gains after record losses. And, secondly, the pandemic is far from over, with some states still recording frightening numbers of new cases and deaths.

So, while good news is more than welcome, it can mask the devastation wreaked on the economy by COVID-19.

Worries

Some concerns that remain valid include:

1. We’re currently officially in recession
   
2. Unemployment is expected to remain elevated for the foreseeable future
3. On July 17, the Federal Reserve Bank of Atlanta’s GDPNow™ running resource put its real GDP growth forecast for the second quarter at -34.7% (yes, that a minus)
4. On June 1, the Congressional Budget Office reduced its expectations of US growth over the period between 2020 and 2030. Compared with its forecast in January, the CBO now expects America to miss out on $7.9 trillion in growth over that decade

As IMF Chief Economist Gita Gopinath put it on June 24: “We are definitely not out of the woods. This is a crisis like no other and will have a recovery like no other.”

Markets seem untethered from reality — or not?

On July 12, The Washington Post quoted Moody’s Analytics chief economist Mark Zandi:

The stock market and the economy have parted ways. I’m not sure what will trigger a sustained sell-off in stocks, but surging [virus] infections and another round of more business closures will be difficult for investors to ignore much longer.

Amateurs bored by lockdown?

On June 16, controversial, Nobel-prizewinning economist Paul Krugman wrote this for The New York Times:

What are these investors thinking? I don’t think they are thinking — not really. The conventions of financial reporting more or less require that articles about market action ascribe rationality to investors, so stock movements are attributed to optimism about economic recovery, or something. But the reality is that we’re largely talking about young men, many with a background in sports betting, who have started buying stocks and are bullish because they’ve made money so far.

On June 14, CNN Business reported that just one online brokerage, TD Ameritrade, had opened 608,000 new accounts during the first quarter of this year. That was more than double the number in the previous quarter.

Cognitive dissonance? For some

Some, such as Krugman, see this as a response to the boredom of lockdown, with inexperienced and unknowledgeable amateur investors piling into a high-risk environment.

For more seasoned investors, the fact that Federal Reserve interventions effectively (though not yet directly) prop up markets is a continuing source of comfort. Some even believe the Fed might start buying stocks itself in the event of a collapse in confidence, though that would raise all sorts of issues.

Economic reports this week

Last week was an exceptionally busy one for economic reports. But this week is exceptionally quiet.

Few of this week’s reports would stir much interest in investors at the best of times. In these unique circumstances, when markets have so much else to look at, it would be a surprise if the coming days’ data had any impact. The sole exception might be Thursday’s weekly jobless figures.

Forecasts matter

More normally, any economic report can move markets, as long as it contains news that’s shockingly good or devastatingly bad — providing that news is unexpected.

That’s because markets tend to price in analysts’ consensus forecasts (below, we use those reported by MarketWatch) in advance of the publication of reports. So it’s usually the difference between the actual reported numbers and the forecast that has the greatest effect.

And that means even an extreme difference between actuals for the previous reporting period and this one can have little immediate impact, providing that difference is expected and has been factored in ahead.

This week’s calendar

This week’s calendar of important, domestic economic reports comprises:

• Monday: Nothing
• Tuesday: Nothing
  
• Wednesday: June existing home sales (actual 4.72 million homes sold; forecast 4.87 million — seasonally adjusted annualized rate)
  
• Thursday: Weekly new jobless claims to July 18 (forecast 1.41 million new claims for unemployment insurance)
  
• Friday: June new home sales (forecast 710,000 new homes sold — seasonally adjusted annualized rate)

There’s little to set the pulse racing there. Even Thursday’s new jobless claims would have to be shocking to have much effect.

Rate lock recommendation

The basis for my suggestion

Other than on exceptionally good days, I suggest that you lock if you’re less than 15 days from closing. But we’re looking at a personal judgment on a risk assessment here: Do the dangers outweigh the possible rewards?

At the moment, the Fed mostly seems on top of things (though rises since its interventions began have highlighted the limits of its power). And I think it likely it will remain so, at least over the medium term.

But that doesn’t mean there won’t be upsets along the way. It’s perfectly possible that we’ll see periods of rises in mortgage rates, not all of which will be manageable by the Fed.

That’s why I’m suggesting a 15-day cutoff. In my view, that optimizes your chances of riding any rises while taking advantage of falls. But it really is just a personal view.

Only you can decide

And, of course, financially conservative borrowers might want to lock immediately, almost regardless of when they’re due to close. After all, current mortgage rates are at or near record lows and a great deal is assured.

On the other hand, risk-takers might prefer to bide their time and take a chance on future falls. But only you can decide on the level of risk with which you’re personally comfortable.

If you are still floating, do remain vigilant right up until you lock. Make sure your lender is ready to act as soon as you push the button. And continue to watch mortgage rates closely.

When to lock anyway

You may wish to lock your loan anyway if you are buying a home and have a higher debt-to-income ratio than most. Indeed, you should be more inclined to lock because any rises in rates could kill your mortgage approval. If you’re refinancing, that’s less critical and you may be able to gamble and float.

If your closing is weeks or months away, the decision to lock or float becomes complicated. Obviously, if you know rates are rising, you want to lock in as soon as possible. However, the longer your lock, the higher your upfront costs. On the flip side, if a higher rate would wipe out your mortgage approval, you’ll probably want to lock in even if it costs more.

If you’re still floating, stay in close contact with your lender.

Closing help

Until recently, we’ve been providing information in this daily article about the extra help borrowers can get during the pandemic as they head toward closing.

You can still access all that information and more in a new, stand-alone article:

What causes rates to rise and fall?

In normal times (so not now), mortgage interest rates depend 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 5% interest ($50) each year. (This is called its “coupon rate” or “par rate” because you paid $1,000 for a $1,000 bond, and because its interest rate equals the rate stated on the bond — in this case, 5%).

• Your interest rate: $50 annual interest / $1,000 = 5.0%

When rates fall

That’s a pretty good rate today, so lots of investors want to buy it from you. You can sell your $1,000 bond for $1,200. The buyer gets the same $50 a year in interest that you were getting. It’s still 5% of the $1,000 coupon. However, because he paid more for the bond, his return is lower.

• Your buyer’s interest rate: $50 annual interest / $1,200 = 4.2%

The buyer gets an interest rate, or yield, of only 4.2%. 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 7%. Interest rates and yields are not mysterious. You calculate them with simple math.

Mortgage rates FAQ

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

Verify your new rate (Jul 22nd, 2020)