October 27, 2017
Mortgage rates recovered some of their recent losses today, with most lenders moving back into Wednesday's territory. The improvement followed another round of rumors regarding Trump's Fed Chair selection process. Specifically, Jerome Powell was indicated as the frontrunner this time around. Here's why that's important.
The Fed Chair (a role currently filled by Janet Yellen) is perhaps the most important person in the world when it comes to interest rate movement. While the Fed will ultimately be forced to adapt its rate policy to economic conditions, so many of the ups and downs we experience along the way are driven by the Fed's decisions. And the Fed Chair has a disproportionate amount of control over those decisions compared to anyone else at the Fed. In short, don't think of the Fed as a "jury" of equals. There's a clear hierarchy, with the Chairperson obviously being at the top.
Rates, and markets in general, prefer Powell to Taylor (the two frontrunners). So when the Powell headlines came out, rates (and stocks for that matter) improved noticeably. While this wasn't a big enough improvement to change the bigger-picture trend toward higher rates, it definitely kept that trend from accelerating. More importantly, it provides anyone who'd been unable to do so previously an opportunity to lock in a rate that's actually better than the previous day's offerings for the first time this week.
Loan Originator Perspective
Bonds finally caught some gains today, amid chatter on potential Fed Chairman nominees. While rallying is welcome to say the least, we're still hovering above technical levels that previously served as rate ceilings, rather than floors. Long story short, don't sleep on rising rates yet. It's going to take more than a day's gains to break this trend. Lock early; if you must float do so with the utmost caution. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.0-4.125%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2017 had proven to be a relatively good year for mortgage rates despite widespread expectations for a stronger push higher after the presidential election in late 2016.
- While rates remain low in absolute terms, they've moved higher in a more threatening way heading into the 4th quarter, relative to the stability and improvement seen earlier in 2017
- The default stance for now is that this trend toward higher rates has the potential to continue. It will take more than a few great days here and there for that outlook to change.
- For weeks, this bullet point had warned about recent stability inviting a bigger dose of volatility. That volatility is now here. As such, locking is generally the better choice until the volatility is clearly dying down.
- 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.