Mortgage rates were somewhat higher today as politicians struck a more conciliatory tone in Italy.  To be clear, we are indeed talking about mortgage rates in the United States in relation to European politics.  It's not the first time and it likely won't be the last.

The European Union is massive in terms of the size of its economy and its impacts on the global financial system.  Threats to the stability of the EU cause shockwaves in financial markets.  Those shockwaves have an impact on everything from stock prices to mortgage rates. 

The latest threat is Italy's would-be government: a coalition between 2 parties that are both less than enthusiastic about Italy remaining in the EU.  They drafted a lawmaking gameplan 2 weeks ago, and while it didn't include any specific goals regarding the country's EU membership, one of their nominees is a vocal proponent of a Brexit-style departure for Italy.

Yesterday's surge toward lower rates occurred because the Italian President vetoed that nomination.  At first glance, that might seem like good news because it keeps the guy who wants to leave the EU out of office.  The unintentional consequence is that new elections would have to be held and those elections would likely evolve into a referendum on Italy's membership in the EU.

Today saw the political tone move in a more moderate direction, with key players on both sides expressing some willingness to sort things out and try to avoid snap elections.  This does more than anything defuse the sorts of risks that helped rates yesterday.  In short, that's why rates moved higher today.  To whatever extent the conciliatory tone grows, rates could continue higher.

Loan Originator Perspective

Bond markets' recent rally stalled today, and we surrendered a portion of yesterday's robust gains.  We may have seen week's best pricing this AM.  With May's jobs report looming Friday, I'm back to locking deals within 30 days of closing.- Ted Rood, Senior Originator

Today's Most Prevalent Rates

  • 30YR FIXED - 4.5-4.625%
  • FHA/VA - 4.375%
  • 15 YEAR FIXED - 4.00%
  • 5 YEAR ARMS -  3.75-4.25% depending on the lender

Ongoing Lock/Float Considerations

  • Rates have been moving higher in a serious way due to headwinds that cannot be quickly defeated.  These include the Fed's increasingly restrictive monetary policy outlook, the increased amount of Treasury issuance to pay for the tax bill (higher bond issuance = higher rates), and the possibility that fiscal stimulus results in higher growth/inflation.

  • While we may see periodic corrections to the broader trend toward higher rates, it's safer to assume that broader trend can and will continue.  Until that changes, it makes much more sense to remain heavily-biased toward locking as opposed to floating.
  • 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.