September 11, 2017
Mortgage rates finally had a bad day, but everything's relative. This sort of bad day leaves the average lender quoting rates that would have been the best of 2017 any other time before last week. It's only when compared to last week that we'd consider them to be moderately higher.
How much higher are we talking about? Let's put it this way: most borrowers will still be quoted the same interest rates seen on Friday with the weakness being seen in the form of slightly higher upfront costs. In the worst cases, the cost change could be just over 0.3% of the loan amount, or $300 for every $100,000 borrowed. The alternative would be to move up an eighth of a point in rate and pay lower upfront costs (or potentially get a lender credit, depending on the scenario).
As far as the motivation for the mini rate spike, credit goes primarily to an absence of North Korea-related drama over the weekend as well as Hurricane Irma failing to live up to its most dire potential. Both of those events had markets on edge, putting money into bond markets (which pushes rates lower) and holding back investing in stocks. Today was a reversal of those themes with a big stock rally that brought major averages to near-record levels.
As to whether or not this is the beginning of a sustained move toward higher rates, it's too soon to say for sure. At the very least, today suggests more defensiveness in the short-term strategy when it comes to locking and floating.
Loan Originator Perspective
Bond markets regressed today, as Hurricane Irma's damage wasn't as fearsome as some predicted and North Korea failed to launch any missiles all weekend. My pricing was off about 25 bps on this morning's rate sheets, and markets have continued tailing off since then. Keep in mind that we're squarely in the same range as most of last week, this isn't a huge move, but it does raise the question "where do we go from here?" My loans closing within 30 days are locked. -Ted Rood, Senior Originator
With today's mini sell off in bonds, i think locking is the way to go. Investors do not appear motivated to take bond prices any higher which would result in lower rates. The trend still looks to be our friend, but we are pushing up against a ceiling that if broken could take yields higher quickly. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 3.875
- FHA/VA - 3.5%
- 15 YEAR FIXED - 3.125%
- 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.