January 12, 2018
Mortgage rates caught a break yesterday by moving lower for the first time this week. They arguably caught a break again today by not moving any higher than they did. Underlying bond markets (which drive mortgage rate changes) were rocked this morning by stronger inflation data. The important Consumer Price Index (CPI) was expected to hold steady at the same low levels that have persisted since the middle of 2017. The modest uptick in inflation sent bond yields higher and resulted in most mortgage lenders putting out noticeably higher rates this morning.
Lenders don't like to put out more than one rate sheet per day if they can help it, but if markets move enough, they will "reprice." After the initial trauma, bond markets began a trend of improvement that ultimately resulted in widespread positive reprices for mortgage rates. We didn't quite make it back to yesterday's levels, but we did manage to avoid ending the day at fresh 6-month highs. The same couldn't have been said if the day ended this morning.
In the bigger picture, rates remain under general pressure. There's some hope in the outlook thanks to 2 decent bounces against rate ceilings in bond markets this week, but we have yet to see that hope materialize in the form of a sustained move lower. It makes sense to remain defensive until that changes.
Loan Originator Perspectives
Bond retreated today, as consumer inflation data showed prices edged up faster than expected. With oil prices continuing upward and economies seemingly soaring, it's tough to find motivation for rates to fall. I'm continuing my prior process of locking early, for loans closing within 30-45 days. I'd love to say a massive rally is looming, but that doesn't appear to be the case. -Ted Rood, Senior Originator
I had been advising a client to lock since early in the week, when he ratified. We lost ground in the morning, but a mini-rally got him back to even with our lender. He locked and is content. In times like now, caution is important. Good reports aren't helping as much as bad reports are hurting. And, lately, sellers are selling. Lock bias. -Matt Hodges
Today's Most Prevalent Rates
- 30YR FIXED - 4.125%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.375%-3.5%
- 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 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.