October 17, 2019
Mortgage rates didn't do much today, but risks are increasing that movement will be more brisk in the coming business days. Blame European politics--specifically: Brexit.
This isn't the mortgage rates' world first go-round with the U.K.'s lengthy process of exiting the European Union (aka "Brexit"). In fact, Brexit was the single biggest factor that helped drive rates down to the long-term lows seen in 2016. For most lenders, those rates were close enough to the all-time lows seen in 2012. The fact that they were available in the middle of the summer homebuying season only made things better for the housing market. Thanks Brexit!
More than 3 years later and the U.K. is set to run into yet another deadline for its divorce from the EU. This one has been on the radar for months, but it's been getting more interesting as it approaches. Just this morning, news broke of a compromise deal reached between U.K. leaders and the EU. Such a compromise would sooth investors' concern about the economic fallout from the alternative "no-deal Brexit." In general, "soothed investors" = higher rates, all other things being equal.
The deal is far from done, however. As of this afternoon, British parliament is not thought to have enough votes to approve the proposed deal. That sets the country up for another delay of at least 2 months or even for a no-deal scenario. The vote won't take place until Saturday. There is a wide range of potential reactions to the few available outcomes. Long story short, mortgage rates face a wider range of potential movement depending on the outcome of Saturday's vote. Even before the vote, interest rates in the US could easily react (or overreact) to any strongly-worded headlines that seem to change the probability for a particular outcome.
Loan Originator Perspective
Bonds flatlined through midday before retreating slightly this afternoon. My pricing was comparable to Wednesday's, but tomorrow's may be worse if MBS keep regressing. There's no clear trend here, but feels like rates want to rise more than drop. I'm locking November closings as early as possible. -Ted Rood, Senior Originator
Continuing to Lock all loans with a 30 day or less closing time frame. Volatility level for rates seems to be playing towards higher rates for at least the near future. -Al Hensling
Today's Most Prevalent Rates
- 30YR FIXED -3.75%
- FHA/VA - 3.375%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.25-3.75% depending on the lender
Ongoing Lock/Float Considerations
- 2019 has been the best year for mortgage rates since 2011. Big, long-lasting improvements such as this one are increasingly susceptible to bounces/corrections
- Fed policy and the US/China trade war have been key players. Major updates on either front could cause a volatile reaction in rates
- The Fed and the bond market (which dictates rates) will be watching economic data closely, both at home and abroad, as well as trade war updates. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will lead to new long-term lows.
- 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.