Mortgage rates were steady to slightly lower on average today, confirming the end of a somewhat abrupt correction from last week’s 2017 lows. In other words, rates rose quickly during the first days of the week and spent the last 3 days leveling off. To put “abrupt” in context and reiterate yesterday’s thoughts, the worst case scenario would be an eighth of a percentage point higher in rate from last week. That’s $14/month on a $200k loan. We’ve certainly seen worse weeks day, but only 2 of them were in 2017.
The flat momentum at the end of this week isn’t too likely to stick around next week. The Fed will (probably) make a landmark announcement that confirms the start of its balance sheet reduction efforts. This means slightly less bond-buying each month, and could put upward pressure on rates. Financial markets are widely expecting that, however, and the Fed has already fully mapped out its game-plan for the program. So the bigger impact to rates would come from any updates to the Fed’s forecasts or the verbiage in the policy statement.
With the most recent major development for mortgage rates being a bounce at the lowest levels of the year, it makes more sense to stay on guard against upward pressure until and unless we see renewed momentum toward lower rates.
Loan Originator Perspective
Another non-descript day in bond markets on Friday, as yields posted small losses. My rate sheets were virtually identical with Thursday’s. The highlight of next week’s events is Wednesday’s policy statement, press conference, and interest rate decision. I don’t see rates moving much prior to that; whether that’s a cue to lock or float depends on personal risk tolerance.
Today’s Most Prevalent Rates
- 30YR FIXED – 3.875-4.0%
- FHA/VA – 3.5%
- 15 YEAR FIXED – 3.25%
- 5 YEAR ARMS – 2.75 – 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Investors were relatively convinced that the decades-long trend toward lower rates had been permanently reversed after Trump became president, but such a conclusion would require YEARS to truly confirm
- Instead of continuing higher in 2017, rates instead formed a narrow, sideways range, and held inside until April. Investor perceptions are shifting such that fiscal reforms and other policy developments will need to live up to expectations in order to push rates higher. Geopolitical risks would also need to avoid flaring up (more than they already have)
- For the first time since the election, we’re in a rate environment where you wouldn’t be crazy not to lock at every little opportunity/improvement. Until/unless it’s broken, the highest rates of early-2017 mark the ceiling, and we’re now waiting to see how much lower we can go from here.
- Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are “effective rates” that take day-to-day changes in upfront costs into consideration.