July 5, 2015 05:25 AM Eastern
Mortgage Rate Lock Recommendation
July 2 2015
Lock if closing in 7 days:Rates may be heading up
Lock if closing in 15 days:Rates may be heading up
Lock if closing in 30 days:Rates may be heading up
The domestic economic data published this morning suggest a continuing recovery -- but a slow and patchy one. This is probably good news for those who prefer their mortgage rates low (they often tend to rise when the economy's expanding rapidly), but others might wish to see a stronger and more consistent return to growth. Today's employment situation figures were fine: total nonfarm payroll employment increased by 223,000 in June, and the unemployment rate ticked down to 5.3 percent. However, they weren't as good as most analysts had hoped. Meanwhile, initial claims for unemployment insurance increased by a seasonally adjusted 10,000 during the week ending June 27. The factory sector is still struggling to find its feet, and new orders in June fell by a full 1.0 percent. That was the ninth month in the last 10 that saw falls.
Ten-year U.S. Treasury bond yields rose again yesterday to close at 2.43 percent. That's its third highest level in a month, which suggests investors have shrugged off continuing scary news from Greece and recent poor data from emerging economies.
Those yields are important because there's a close relationship between 10-year U.S. Treasury bonds and mortgage rates. And when bond yields rise or fall, mortgage rates almost always follow, though sometimes after a short delay.
Freddie Mac published its weekly survey of average mortgage rates this morning, and that for a 30-year fixed-rate mortgage during week ending July 2 was 4.08 percent with an average 0.6 point. The same rate was 4.02 percent (0.7 point) during week ending June 25, and 4.00 percent seven days before that. This was the fourth consecutive week during which that particular rate began with a "4," and those commentators who predicted it might be a very long time before a "3" is seen again in that spot are looking increasingly prescient.
Freddie chief economist Sean Becketti observed, "Overseas events are generating significant day-to-day volatility in interest rates. Nonetheless, the week-to-week impact on most rates was modest."
Forecasting the direction of mortgage rates is difficult at the best of times. Something that might be expected in some circumstances to push both them and bond yields up can in others exert a downward force -- and vice versa. Those forecasts are especially perilous when the future prospects of economies around the world are so hard to judge, and volatility is a feature of most markets. However, absent more shock developments, few expect large changes in mortgage rates within the scope of these rate lock recommendations.
There won't be a post in this space tomorrow, because markets are closed for the Independence Day weekend. Everyone at LendingTree hopes you have a very enjoyable break.
"Locking" your mortgage means that you and your lender have agreed on an interest rate and price for your home loan. Once your loan is locked, that's the rate and price you get, regardless of what happens in the financial markets. If rates go up, you're protected but if rates go down, you won't benefit either -- you close your loan at the rate you've locked and you can’t change it. Locks have expiration dates ranging from 30 to 60 days or more, and the longer your lock period, the more it costs. If you don't close your loan on time, you could end up paying a higher interest rate.
You can lock in your loan at any time during the process. Until you lock your interest rate, you are said to be "floating" your mortgage. The only rule is that you have to lock in before you can close on your purchase or refinance.
The decision to lock or float your loan can have a long term impact so it’s important you make the right choice. That’s why we offer a quick rundown of the key factors that drive mortgage rates today and everything you need to know.
Recent Mortgage Rate Articles
Recommended Mortgage Rate Articles