Today’s Mortgage Rates and Lock Recommendation

Mortgage Rates Today for May 5 2021

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Today’s Mortgage Rates

Program
APR
Change
Conventional 15-Year Fixed
2.18%
0.00%
Conventional 30-Year Fixed
2.80%
-0.01%
FHA 15-Year Fixed
3.37%
-0.23%
FHA 30-Year Fixed
3.15%
-0.10%
VA 15-Year Fixed
3.34%
-0.01%
VA 30-Year Fixed
2.37%
-0.05%

 

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What’s Affecting Mortgage Rates Today?

Today’s mortgage rates opened with mixed results following a favorable economic release. Conventional mortgage rates fell while government-backed home loan rates increased.

April’s ADP Employment numbers showed the addition of 742,000 new private sector payrolls. Economists anticipated that the payroll processor added 830,000 jobs, so this report was a big miss. The weaker number is favorable for mortgage rates.

However, the financial metrics below nearly all point to higher mortgage rates.

Should You Lock Your Mortgage Rate Today?

Mortgage rates are mixed today, and the financial data below are unfavorable for rates. If you’re closing very soon on a conventional loan, consider locking in today. And if you’re applying for a government-backed loan, keep an eye on rates and lock in if your lender’s offer is good.

If you need to float a government-backed loan a day or two to get into a cheaper tier (like a 15-day lock instead of a 30-day lock) you can probably do so safely. Often, when conventional and government loan rates move in different directions, there is a correction the next day.

Closing (Days) Recommendation
7 days LOCK
15 days FLOAT
30 days FLOAT
45 days FLOAT
60 days FLOAT
> 60 days FLOAT

Locking isn’t always right 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 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.t fall before you close and that you’ll close before your lock expires. Your decision depends on your tolerance for risk.

Are Mortgage Rates Going Up or Down?

Mortgage rates are trending higher. Every well-known mortgage rate forecast predicts interest rates rising in 2021. As the economy recovers from the pandemic, expect prices to surge, inflation to become a concern, and mortgage rates to increase.

If you can get your mortgage sooner rather than later, you’ll probably get a much better rate than you will if you wait until 2022.

See if you qualify for a home loan in just 5 minutes.

Financial Markets and Today’s Mortgage Rates

How mortgage rates and financial markets look like today

Today’s indicators are biased in favor of higher mortgage 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:

Stocks

Major stock indexes opened higher. Stock market prices are reasonably 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 prices are bad for mortgage rates.

Treasury Yields

 The 10-Year Treasury note yield rose by 3/100ths of 1% to 1.60%. Yields on 10-year Treasuries usually move in the same direction and degree as mortgage rates, so today’s move is bad for mortgage rates.

Oil Prices

Oil prices increased by $.94 to $66.31 per barrel. That’s bad for mortgage rates. Because oil is necessary for most economic activity in the US, rising oil prices trigger fears of inflation. This often causes interest rates to increase, while falling oil prices generally cause interest rates to drop.

Gold Prices

The price of gold dropped $12 to $1782 per ounce. Rising gold prices often indicate economic weakening and lower interest rates, but rates often increase as gold prices fall. Today’s change is slightly bad for mortgage rates.

Fear and Greed

CNNMoney’s Fear & Greed Index measures how optimistic or pessimistic market participa04nts are by using a variety of formulas. When investors are optimistic or “greedy,” mortgage rates tend to increase. And when investors become more “fearful,” interest rates fall. Today’s index remains unchanged at a “greedy” 66. The scope and direction of this movement are neutral for mortgage rates.

This Week’s Economic Schedule

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 is fairly light on major reports. Wednesday may deliver the most volatility.

Monday

April’s Institute for Supply Management’s (ISM) manufacturing index tracks manufacturing executive sentiment and it’s a fairly important report. Analysts expect the index to increase to 65.3, meaning that manufacturing executives are seeing improvement in their businesses. A smaller number would be good for mortgage rates, while a larger one could trigger inflation concerns and higher mortgage rates.

Tuesday

February’s Factory Orders report tracks orders for both durable and non-durable goods. It measures manufacturing sector strength but is considered to be only modestly important to the bond and mortgage markets. Experts predict a 0.7% increase in orders. If the actual numbers vary wildly, they might influence mortgage rates, with higher numbers being bad and lower numbers being good.

Wednesday

ADP, the payroll processing giant, will release its ADP monthly payroll report for April. Market participants pay attention to this private non-government labor report because they believe it may foreshadow Friday’s Monthly Employment Situation Report from the Labor Department. That report is the most important one we see each month, but the ADP report gets attention as well. Experts anticipate that the report will show the addition of 830,000 new jobs to the economy. More would be bad for mortgage rates, while fewer payrolls would be good.

Thursday

Analysts anticipate that last week’s unemployment claims report will show that 525,000 claims for benefits were filed. More claims would be bad for the economy but good for mortgage rates. Fewer claims would be good for the recovery, but possibly lead to inflation — bad for mortgage rates. This week’s report won’t get much attention, however, because investors will be more focused on Friday’s monthly numbers.

Friday

The most important report of the month is April’s Employment Situation Report from the Labor Department. The experts predict that the US economy added 978,000 jobs last month. And that the unemployment rate fell from 6% to 5.8%. Fewer jobs and higher unemployment would be bad for the economy but good for mortgage rates. More jobs and lower unemployment would be good for the economy but potentially bad for mortgage rates.

Why Mortgage Rates Change

In general, a strengthening economy 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 weakens, 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 how the economy causes prices for bonds and mortgage-backed securities (MBS) to increase or decrease. And how yields (interest rates) respond when the price of a bond or MBS changes.

How Bond Prices and Interest Rates Work

Bond issuers create $1,000 bonds paying a specific interest rate. The issue price, $1,000 per bond, is often called “par.” The interest rate for that bond is called the “coupon rate.” If you buy a $1,000 bond paying 5%, your yield would be 5% — the same as the coupon rate.

Your interest rate: $50 interest / $1,000 bond price = 5%

However, bonds don’t stay at par pricing — they trade similarly to stock shares, and their prices rise and fall all the time. These price changes are caused by events that impact the global economy. Events that point to economic expansion and possible inflation cause the demand for bonds to fall and rates to increase.

On the other hand, events that indicate economic instability or failure cause investors to desire safer investments like bonds and MBS. 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 buy a bond at par from the issuer, the economy becomes troubled. Maybe by a war overseas or a global pandemic. Investors demand safe places to put their money and 5% becomes a highly desirable interest rate. 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 happens when the economy gets better. Suppose that after you purchased your $1,000 bond, the pandemic is resolved with the invention of a vaccine, and the warring countries overseas come to terms. The stock market comes roaring back, 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%

What Are Mortgage-Backed Securities (MBS)?

A mortgage-backed security is an investment similar to a bond. The security is backed by a bundle of home loans bought from mortgage lenders that issue them. Investors in MBS receive payments similar to bond coupon payments.

Most mortgage-backed securities are issued by Fannie Mae, Freddie Mac, and Ginnie Mae. These companies were supported by the government to make homeownership more accessible to consumers. Fannie Mae, Freddie Mac, and Ginnie Mae also set guidelines that banks and lenders must follow in order to protect the investors who buy MBS.

MBS are not as safe as US Treasuries, so their yields tend to run a little higher. However, they are widely viewed as safe investments and their yields (rates) tend to move in the same direction as those of Treasuries.

What Is a Mortgage Rate Float Down and Do You Want One?

What Is a Mortgage Rate Float Down and Do You Want One?

If deciding to lock or float your mortgage rate stresses you out, there is another option — the float-down.  A float-down allows you to lock in a mortgage rate, but if rates drop before you close on your home loan, you get to close at the lower rate.

Float-downs are not free — you either pay an upfront fee for the privilege or accept a slightly higher interest rate.

Not all float-downs are the same. Some lenders only let you exercise the float down option the day they draw your closing documents. Others allow you to lock in a lower rate any time during the process.

Still, others require the new rate to be at least a certain percentage lower than your locked rate before they let you change to the lower rate — .125 to .25 percent is typical.

Read your documents carefully, and understand what a float down will cost you and what you’ll get for your money.

7 Comments
  1. Arlene Ann Miller says

    Great information. Thank you. This is a great help in me doing due diligence during my home refinance process.

  2. Connie Park

    Hello,

    I came across your name recently on a web search. My husband and I just recently were told by a mortgage broker that due to his credit score being to low 573, that he would not qualify for a mortgage.
    (The reason for this is due to two collection accounts that are on his credit report along with him being a authorized user on my credit card that has high balance).

    If I can back this story up a bit so you can understand what we were planning on doing was selling our current home in NY and purchasing a home in Florida. This too was going to be a possible problem due to my husband will be continuing working in NY while and my daughter were going to move to the Florida house. He would travel down on his time off. This is another question that we want to know if this is an issue?

    If you could advise if this is something that you possibly could help us with we would appreciate it. We just feel that we are stuck in NY until his credit score increases.

  3. Juanita Ramirez

    I have a home picked and would like to purchase it. I am a registered nurse and 1st time home buyer.

  4. Dianne B. says

    I would like to see if I can get pre-approved
    People with worst credit than me have been able to purchase

  5. Gina Pogol says

    You can get preapproved in minutes right here! Just click the button that says “Check if you qualify.”

  6. Gina Pogol says

    I am happy that the content is helpful to you. To prequalify or get preapproved, please just click the “Prequalify Now” link and a loan officer will help you.

  7. […] See today’s mortgage rates now. […]

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