October 30, 2017
Mortgage rates recovered even more of their recent losses today, following reports that lawmakers were considering "phasing in" a 20% corporate tax rate by 2022 as a part of the current tax reform efforts. The President's previously announced tax reform principles call for 20% out of the gate.
When those principles were initially released, stock prices and interest rates rose in unison. On one hand, lower taxes are seen stimulating the economy, which traditionally puts upward pressure on stocks and rates. On another note, some analysts think the tax plan would result in more government borrowing--something that hurts interest rates specifically because it creates more supply of the bonds that drive interest rate movement (higher supply = lower prices, and lower bond prices = higher rates).
With all of the above in mind, any news that detracts from the original tax principles should help rates recover and should also put some pressure on stocks to move lower. That's exactly what happened today. It's the 2nd straight day of solid gains for rates, bringing most lenders to their best levels in at least a week.
Whether this proves to be a turning point in the bigger picture remains to be seen. Rates are in a well-established uptrend. While that won't last forever, we'd like to see a bit more of a recovery before ruling out the continuation of the broader uptrend. Ultimately, bond traders will want to see Trump nominated Jerome Powell to Chair the Federal Reserve in order for rate stability to materialize.
Loan Originator Perspective
So far, so good, as our two day rally proceeded today. The motivation could be the FBI indictments unveiled today, or just a case of market equilibrium. Either way, our pricing doesn't reflect markets' gains yet, so I'll carefully float a day or two in hopes pricing catches up. Can't call this a defined rally yet, but it certainly could be the start of one. -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.