Mortgage Rates

December 10, 2016 05:44 AM Eastern

Refinance rates now in Woodbridge, NJ [Change this]

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    Home Price (Purchase)
    When you get a mortgage to purchase a home, the lender uses the lower of the agreed-upon purchase price or the property's appraised value to determine your maximum loan amount. The loan amount divided by the property home price equals your loan-to-value ratio, or LTV. That ratio is one of the major factors that lenders use to set your mortgage rate. If your LTV exceeds 80 percent, you'll probably be required to pay mortgage insurance, which increases your monthly payment. If the property appraises for less than the agreed-on purchase price, you are not usually required to complete the purchase.
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    Home Value (Refinance)
    This is your estimate of the current value of your property. When you refinance, your home is almost always evaluated by a licensed appraiser. The refinance loan amount divided by the property's appraised value equals your loan-to-value ratio (LTV), and that number is one of the major factors that determine your mortgage rate. To get an accurate refinance rate quote, your home value estimate must be reasonably accurate.
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    Down Payment
    The down payment is the amount you pay upfront when you finance property. Your purchase price minus your down payment equals your mortgage amount. The higher your down payment, the more likely you are to be approved for a home loan. If your down payment is less than 20 percent of the purchase price, you'll probably be required to pay for mortgage insurance, which increases your monthly payment.
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    Credit Score
    Your credit score is a number designed to measure your credit-worthiness. It's based on a formula that combines many factors, including your payment history, amount of credit used and number of accounts. This number is used by lenders to calculate the probability that you'll default on your mortgage. Most lenders won't approve mortgages to applicants with credit scores lower than 620. Your credit score is one of the most important factors that determines your mortgage rate - applicants with higher scores are offered better mortgage rates.
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Mortgage rate quotes displayed on LendingTree LoanExplorer℠, including loan pricing data, rates and fees, are provided by third party data providers including, but not limited to, Mortech®, a registered trademark of Zillow®, LoanXEngine, a product of Mortgage Builder Software, Inc., and LoanTek, Inc.

Mortgage Rate Trends

Monthly | Daily

If this is your first time viewing the following daily report, you'll probably benefit by reading all the way to the end. That would give you the whole picture on the trends you need to know about, and an idea of what you should be looking for each day. But the information that changes daily or frequently is all in earlier paragraphs of each report. So old hands don't need to go beyond "The Longer Term" below.

Mortgage Rate Lock Recommendation

Dec. 9, 2016 - Lock

Outlook

It looks as if mortgage rates might rise today. However, that prediction is based on early market trends and those often change during the day, so a holding steady or fall remain possible. Still, if we were currently buying a home, we'd lock our rate today.

However, you might just think about adopting a longer Float strategy regardless of daily fluctuations if you have some weeks to go before you must lock. That's because some believe there's a chance of a more sustained market correction ahead, though that's far from a certain bet, and any such correction looks unlikely to see a return to pre-election conditions. What you choose to do will be largely down to your personal tolerance for risk.

If you do decide to float, it's often a good idea to set an upper limit on the rate you're comfortable paying, and to resolve to lock and cut your losses when that limit is reached. Use the LendingTree mortgage calculator to model how rate changes affect your monthly payments. Setting a cap may help you avoid a more destructive upward spiral. Either way, the current volatility and unpredictability in markets means there's risk in doing anything – including nothing.

Read on for more ...

Today

A quiet week ends quietly. No "market moving indicators" (significant releases of domestic economic data) are on today's calendar, and neither are there any U.S. Treasury auctions or Federal Reserve officers speaking in public. Those Fed people are now in "purdah," which is a period of self-imposed silence that always occurs immediately prior to the regular meetings of the Federal Open Market Committee (FOMC) at which they decide their organization's interest rates – and consequently many others. That decision is due next Wednesday, and most investors are close to certain a small rise will be announced then. However, anticipation of the meeting's outcome can still affect mortgage rates, as might foreign news and general market sentiment.

By approaching 10:00am ET, yields on 10-year U.S. Treasury bonds, which are usually closely tied to mortgage rates, were appreciably higher. While those yield trends on those bonds at that time of the morning frequently turn out to be accurate predictors of the direction of travel for the day's mortgage rates, they slow, accelerate or reverse sufficiently often that they can't be relied upon as a basis for making important financial decisions. And in any event, the relationship between those and mortgage rates can sometimes become elastic.

Earlier, major foreign stock-market indexes were mostly higher across Asia and Europe, with just a couple of exceptions. Twenty-three minutes after opening, the Dow Jones industrial average was up +0.19 percent. At 9:45am ET, crude oil prices stood at $51.51/barrel, compared with the $50.53/barrel seen at 9:47am ET yesterday.

Recent Mortgage Rates

Average rates for 30-year fixed rate mortgages (FRMs) rose yesterday by 2 basis points (a basis point is one-hundredth of 1 percent – see below for a longer explanation), according to Mortgage News Daily (MND). That was a smaller increase than looked likely at 10:00am ET yesterday.

To add some context, the average yesterday evening was 56 basis points above its level on the day before the presidential election. So, based on a nationwide average, someone with a great credit score, small non-mortgage debts and a big down payment might on November 7 have been offered a rate of 3.59 percent on a 30-year FRM. Yesterday, that same applicant would likely have had to pay 4.15 percent.

The average rate nationwide for a 30-year FRM during the week ending December 8 was 4.13 percent with an average 0.5 point, according to Freddie Mac's weekly rates survey, published yesterday morning. It was 4.08 percent during the week ending December 1, and 4.03 percent seven days before that. This time last year, the average 30-year FRM came in at 3.95 percent.

Freddie Mac chief economist Sean Becketti commented in a statement accompanying the latest data:

The 10-year Treasury yield dipped this week following the release of the Job Openings and Labor Turnover Survey. The 30-year mortgage rate rose another 5 basis points to 4.13 percent, starting the month 18 basis points higher than this time last year. As rates continue to climb and the year comes to a close, next week's FOMC meeting will be the talk of the town with the markets 94 percent certain of a quarter-point-rate hike.

The Longer Term

The Mortgage Bankers Association must feel vindicated that its previously pessimistic seeming predictions for rates have suddenly become highly realistic. In its November Mortgage Finance Forecast, it reckons the average rate for 30-year FRMs will creep up during every quarter until the end of next year, reaching 3.9 percent in the last three months of this year. It goes on to predict rates will start 2017 with a quarterly average of 4.0 percent and end it at 4.4 percent. It expects further increases in later years, with rates reaching 4.8 percent by the end of 2018, and averaging 5.3 percent in 2019.

In spite of being published weeks into the month, Fannie Mae's November Housing Forecast says, "Interest rate forecasts are based on rates from October 31, 2016." Given subsequent events, that seems almost perversely unhelpful. And, it means Fannie is still predicting that the rate for 30-year FRMs will average 3.5 percent in the current quarter. Meanwhile, its forecasts for that average have changed only slightly further into the future: 3.6 percent for the first half of 2017, 3.7 percent for the second half and 3.8 percent through 2018. If you believe those numbers, there's a bridge you may be interested in buying ...

In their November Outlook report, Freddie Mac's economists were more vague about future rates than they normally are. They forecast that 30-year FRM rate will be averaging 4.1 percent through 2017, including 4.2 percent in the last quarter of that year. That's close to where they are now.

You may prefer to see all these numbers as a sign of how difficult it is to forecast rates in this challenging economic environment, rather than as reliable guides to the future.

Your Dilemma

There remains a continuing risk in choosing to float or lock your rate. True, there are opportunities for rewards should rates fall, but there is also a continuing danger of being trapped in an upward cycle that doesn't end before you have to lock.

So those who are cautious may wish to lock today, trading the possibility of future falls in rates for the security of fixing what could still be an exceptionally good mortgage deal by historical standards. Those who like to gamble might prefer to wait awhile before locking, hoping there will be additional falls ahead. Only you can decide on the risk with which you personally are comfortable.

If you do choose to continue to float, it's usually a good idea to set yourself a top limit on the rate you're prepared to pay, and above which you won't go. That would allow you to cut your losses in the event rates enter an upward spiral that lasts beyond when you have no choice but to lock.

Why Mortgage Rates Move

Unlike most other interest rates, those for mortgages (except ones for existing adjustable-rate mortgages) are largely determined by the supply of money into the market from investors and the demand for such loans from consumers. That supply is heavily affected by the amount of risk investors are prepared to sustain in their portfolios. When spooked by economic uncertainty, they tend to buy safer assets, including mortgage securities, which can result in an increased supply of product (cash) that drives down the price (rates). When they're more confident, they tend to invest in riskier but more profitable assets, which reduces the supply of money for home loans, and pushes up rates. A second influence is perceptions of how inflation rates are likely to move over the long term, but that usually tends to be a less important factor in daily and short-term movements – though that tendency may currently be suspended. None of this is to suggest the Federal Reserve doesn't affect mortgage rates, merely that it does so only indirectly by influencing investor sentiment.

The relationship between 10-year Treasury bonds and mortgage rates is more complicated. Investors generally view those bonds and mortgage securities as similarly secure havens for their money when they're spooked – with bonds the safer of the two. That means they tend to buy or sell both at the same time, depending on their level of confidence in the U.S. and global economies. So many lenders refer to those particular Treasury yields when setting their rates. Usually, the relationship between 10-year Treasury yields and mortgage rates is surprisingly close, though rates tend to be less volatile, and sometimes the two drift apart a little.

Some Questions Answered

Why, counterintuitively, do bond yields fall when prices for Treasuries rise? It's because you're buying a fixed return on your investment, and the more you pay for the right to that same fixed amount of money, the lower the yield you're going to get. That's a mathematical inevitability.

Why go on about "analysts' consensus forecasts" when reporting economic data? Well, they're often relevant. That's because investors frequently trade ahead of actual data based on those forecasts. So sometimes the difference between what's reported and what was expected can be as important as that between the new number and the one for the previous reporting period.

What is a basis point? Yes, it's 1/100th of 1 percent, but, when it comes to percentage points and basis points, these numbers are often mind-numbingly confusing. To give a purely theoretical example, suppose the best mortgage rate you could have gotten yesterday was 6.00 percent (let's hope it wasn't!) and that rate subsequently dropped by a single basis point. Your new rate would be 5.99 percent.

What is a market moving indicator? It's simply a release of domestic economic data designated by Bloomberg as such. As the name implies, it's a report that at least sometimes moves markets, and therefore may shift mortgage rates.

What Does it Mean to "Lock" Your Mortgage?

"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.

When Should You Lock?

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.

Mortgage Rates by State

Mortgage rates can vary a lot between lenders on any given day. So, if you only get one mortgage quote, you won't have any idea if there's a better deal out there. That's why the best way to get a mortgage rate it to request quotes from multiple lenders and compare interest rates, loan terms and closing costs. It puts you on in charge and keeps the banks competing to get you the best rate possible. Remember, even .1 percent can amount to thousands of dollars over the course of a loan. Make sure you shop around!

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