June 12, 2017
Mortgage rates were either flat or slightly higher, depending on the lender today. Movement in underlying bond markets suggested a modest increase in rates, but it came too late in the day for most lenders to respond with a mid-day rate change. As such, rates SHOULD be slightly higher, all other things being equal. If bond markets don't change much between now and tomorrow morning, most lenders will be in slightly worse shape.
Keep in mind that we're talking about extraordinarily small variations in loan pricing. Few, if any borrowers would see a change in the actual interest rate quote applied to their prospective loan balance. Rather, the weakness would only be seen in the form of slightly higher upfront costs for the same rates quoted today and late last week (which are still among the lowest of 2017).
True volatility could show up later in the week as the calendar of events gets crowded. There are several important economic reports in the mornings. In particular, Wednesday has a potent combination of economic data in the morning and the Fed Announcement in the afternoon. While a rate hike from the Fed is a foregone conclusion, markets can still react forcefully to any changes in the Fed's rate hike outlook.
With rates still close to long-term lows, risk-averse clients are well within their rights to err on the side of locking. Even the moderately risk-tolerant clients may wish to consider the fact that rates have bounced twice now at roughly the same floor seen in mid-April. More risk-tolerant clients can continue taking heart in the fact that the broader trend has been toward lower rates, both over the past 30 years and the past 3 months. If you choose to float, just make sure you have a strategy in place with your loan originator.
Loan Originator Perspective
Bonds held their ground today, and were slightly higher by mid afternoon. My rate sheets mirrored Friday's. It's nice to lose ground with Wednesday's Fed Policy Statement and Chairwoman Yellen press conference looming, but I doubt we see substantial moves in either direction before then. My July pipeline is locked, August is floating, but will be conferring with those clients before Wednesday. It would take an economically bearish Fed Statement to help us rally from here. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 3.875-4.00%
- FHA/VA - 3.5-3.75%
- 15 YEAR FIXED - 3.125-3.25%
- 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.