September 20, 2017
Mortgage rates rose today following the announcement and--more importantly--the Fed's updated economic projections. The Fed holds 8 meetings a year. They release an official policy announcement after all of those. Four of the meetings are "special" and are followed not only by a policy announcement, but also by updated economic projections from Fed members. These projections include an important "dot plot" of the Fed's rate hike expectations.
The so-called dots have been more important than the actual announcement on some occasions. While most of today's press coverage will focus on the fact that the Fed finally enacted its plan to shrink its balance sheet. That was widely expected, however. Investors weren't sure how the past few months of economic data and events would affect the rate hike outlook. As it turned out, the Fed is more optimistic than investors anticipated. That means they're more willing stick with the previous rate hike outlook for 2017 and 2018, and those rate hike expectations have a direct bearing on today's interest rates.
Conventional 30yr fixed rates didn't spike in any brutal sort of way, but given that the past 2 weeks have already seen a somewhat abrupt increase in rates, today still managed to be unpleasant. 4.0% is now the most prevalently-quoted conventional 30yr fixed rate on top tier scenarios. It had shared the stage with 3.875% roughly equally until today. That leaves today's rates at the highest levels in nearly 2 months.
Loan Originator Perspective
As most expected, the Fed today released the details for its upcoming balance sheet reduction. They didn't "raise rates" (increase their overnight rate), but the announcement confirmed the trend is NOT our friend. Floating here is risky or worse, think we'll see higher rates before lower ones. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 3.875-4.0%
- FHA/VA - 3.5%
- 15 YEAR FIXED - 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.