Mortgage rates today, July 17, 2020, plus lock recommendations

Forecast plus what’s driving mortgage rates today

Average mortgage rates nudged lower again yesterday, creating yet another new all-time low. Today’s rate for a 30-year, fixed-rate, conventional loan is starting as low as 3.0% (3.0% APR). And other types of mortgages offer even lower rates.

Might these rates go even lower? You bet! But recognize that waiting for those would actually be a bet. Because there are no guarantees that further falls will arrive soon — or at all. However, mounting bad news over COVID-19 in much of America make the possibility of yet lower rates more likely.

Find and lock current rates. (Jul 19th, 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. But, if you’re ready to take your cue from them, things are looking quiet for mortgage rates today. 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 inched up to 0.62% from 0.61%. (Bad 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 barely moving but mostly slightly higher. (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 nudged up to $40.81 a barrel from $40.76 (Neutral for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
• Gold prices inched higher to $1,809 from $1,808 an ounce. (Neutral 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 moved slightly higher to 64 from 63 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.

Today might be an unexciting day. Unless things suddenly change.

Important notes on today’s mortgage rates

Freddie Mac’s weekly rates

Yesterday, Freddie Mac revealed, “the 30-year fixed-rate mortgage (FRM) averaged 2.98 percent, the lowest rate in the survey’s history dating back to 1971.” The fact there was an all-time low that day happened to reflect our assessment. But there are good reasons why Freddie and we often differ.

So 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.

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.

Rate lock advice

My recommendation reflects the success so far of the Fed’s actions. 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

Looking good … to some

Back on May 21, Realtor.com® Chief Economist Danielle Hale predicted low mortgage rates for the foreseeable future: “We expect mortgage rates to stay low and possibly slip lower,” she said. “We’ll flirt with the 3% threshold for a while before we go below it.”

And she’s already been proved right. But few other forecasters are currently expecting sustained, sub-3% rates for the rest of this year. Having said that, no economist can have much confidence in their forecasts during such turbulent times.

See the table below for forecasts from Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA).

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 Tuesday and the MBA refreshed its on Wednesday. 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. 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

Last Monday, 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.”

Meanwhile, we’re entering a fresh earning’s season, when publicly traded companies publish their quarterly results. Barron’s is predicting this will be “ugly,” while CNN expects it to be “awful.” The question is, how much will markets care?

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 +42% yesterday, according to The New York Times.

That’s lower than the +44% reported for Wednesday and Tuesday’s +48%. Does that mean the tightening of containment measures in some states is working? Maybe.

But infections still rose by 77,300 cases nationwide yesterday, according to this morning’s Guardian, quoting data from Johns Hopkins. That was a new all-time high, beating the previous one, which was 68,241 set last Friday. Indeed, it was the worst one-day number anywhere since COVID-19 first emerged.

Sobering prediction

We’ve seen over the last few months that public health researchers are scarcely more unanimous nor much better at forecasting than economists. But Dr. Anthony Fauci told the Senate Health, Education, Labor and Pensions Committee on July 2:

We are now having 40-plus-thousand new cases a day. I would not be surprised if we go up to 100,000 a day if this does not turn around, and so I am very concerned.

Two weeks on from his statement and, with yesterday’s 77,300 new cases, we’re already more than halfway toward Fauci’s grisly prediction.

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.

The 14-day change in the number of deaths was +42% yesterday, the Times reckons.

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.

Arguably, tensions between Washington DC and Beijing are currently more strained than they’ve been for several years. That won’t have been helped by the enactment by China on July 1 of a potentially oppressive new security law for Hong Kong in breach of at least one international treaty.

On Tuesday, President Donald Trump signed a bill and executive orders imposing new sanctions on Chinese officials, businesses and banks. And more restrictions on regime officials are being discussed.

A trade war with Europe?

Meanwhile, on June 18, the US fell out with France, Britain, Italy and Spain. Those nations want to close some tax loopholes used by certain American tech companies to artificially reduce the profits they make in those countries. And that’s something the administration is resisting.

As part of this dispute, last Friday saw the White House unveil new tariffs at a rate of 25% on $1.3 billion worth of French goods, including handbags, cosmetics and soap. Those tariffs won’t be imposed for six months, perhaps allowing the two sides to reach an agreement.

Inevitably, those disputes with China and European countries raise the possibility of a new trade war, perhaps on two fronts.

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 16, the Federal Reserve Bank of Atlanta’s GDPNow™ running resource put its real GDP growth forecast for the second quarter at -34.5% (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.”

What shape will the recession take?

Economists are squabbling about the shape (if you pictured it on a graph) the recession might take.

For a while, a V-shaped one (sharp dip and sharp recovery) was favorite. And it still is for some. Indeed, they may well be preening themselves following the latest employment and retail sales reports.

But other shapes are available. So some think a W more likely, especially if there’s a second wave of coronavirus infections following the early ending of lockdowns. A “Nike swoosh” (based on that company’s famous logo) is gaining popularity. That’s a sharp drop followed by a gradual recovery. Most recently, a reverse square-root symbol (√ but backward) has gained in popularity.

But on May 29, The New York Times urged everyone to “Forget swooshes and Vs. The economy’s future is a question mark.” By which it meant, quit squabbling because nobody has a clue.

Markets seem untethered from reality — or not?

On Sunday, 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.

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

This week is packed with important economic reports. Tuesday saw the consumer price index, Wednesday industrial production and yesterday retail sales. Today we had the consumer sentiment index.

Usually, any of those could set markets rising or tumbling. But recently, those markets have generally shrugged off bad news and focused only on the good. There seems little reason to think that’s changed.

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: June consumer price index (actual +0.6%; forecast +0.6%) and core CPI* (actual 0.2%; forecast +0.2%)
  
• Wednesday: June industrial production (actual +5.4%; forecast +4.1%) and capacity utilization** (actual 68.6%; forecast 67.7%)
  
• Thursday: June retail sales (actual +7.5%; forecast +5.4%) and retail sales excluding autos (actual +7.3%; forecast +5.3%). Plus weekly new jobless claims to July 11 (actual 1.30 million new claims for unemployment insurance; forecast 1.25 million)
  
• Friday: July consumer sentiment index (actual 73.2 index points; forecast 78.6). Plus June housing starts (actual 1.19 million new homes started; forecast 1.19 million) and building permits (actual 1.24 million new permits; forecast 1.30 million). Both those last two figures are seasonally adjusted annualized rates
  

*Core CPI is the consumer price index with volatile food and energy prices stripped out. It’s intended to better show underlying trends.

** Capacity utilization measures the percentage of the nation’s potential economic output that’s actually being generated.

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 19th, 2020)