August 10, 2017
Mortgage rates remained in line with 2017's lows today, despite noticeable improvement in underlying bond markets. Under normal circumstances, bond market improvement equates fairly directly with mortgage rate improvement, but things aren't exactly normal lately.
On the simplest level, the timing of market movements over the past 2 days tells the story. The prices of mortgage-backed-securities (MBS) are right in line with those seen yesterday morning when most of yesterday's rate sheets came out. Bonds and MBS weakened yesterday, but not enough for most lenders to change rate sheets before the end of the day. In that sense, today's bond market strength allowed for lenders to keep rate sheets unchanged whereas rates would have been slightly higher had bonds been flat on the day.
Tomorrow morning brings an important piece of economic data--the Consumer Price Index or CPI. This is a key inflation report and one that's moved markets noticeably the last few times it's come out. It could certainly have an impact again tomorrow. Bonds/rates are in position for a weaker reading. While rates could improve if CPI is weak enough, there's more inertia waiting to push rates higher in the event the data is stronger than expected.
Loan Originator Perspective
With bonds still unable to break 2.21, i will continue to favor locking. Tomorrow's CPI data does have the ability to break that, but not sure it is worth the risk at this point. If you want to float, keep an eye out for CPI at 8:30am. Stronger than expected, rates will move higher. -Victor Burek, Churchill Mortgage
We've been in a little bit of a risk off mode for a few days which has benefited bonds and mortgage rates and we have an important piece of economic data in the morning for markets to digest. Personally, with the level of risk seemingly heightened at the moment I would suggest playing it safe and protecting these recent gains. This is especially true for those with lock periods 30 days or less. As always, assess your own personal tolerance for risk before deciding. -Hugh W. Page, Mortgage Banker, SeacoastBank
Bonds capitalized on stock market weakness, Korean angst, and dovish Fed inflation rhetoric today, but remained within recent yield ranges. Until we can break 2.21 yield on treasuries it's tough to call this a rally. Friday's CPI data may provide the fuel to break 2.21, but a weak number may already be presumed. I'm not opposed to floating here, as long as clients are aware rates move both down AND up. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.00%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.375%
- 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.