January 18, 2018
It's Thursday, which means Freddie Mac released its weekly update on mortgage rates. This is typically not that big of a deal because mortgage rates don't tend to move enough in the short term to expose the shortfalls of Freddie's methodology. To be perfectly fair to Freddie, their methodology is fine for those who want a once-a-week look at rates and who aren't currently in the process of shopping for a mortgage or home.
Unfortunately, much of the consumer-level interest in mortgage rate news comes from those who are in the process of shopping from a mortgage or home! Granted, they're not seeking out Freddie's rate survey, but they do tend to come across internet news that cites Freddie's data as a source.
Enter the pitfalls. Freddie's survey deadline is Wednesday for any given week and most of the sample is in by Tuesday. This means that the weekly rate survey ends up being more like a "Monday/Tuesday" rate survey. Again, that's not usually a problem if Wed-Fri look like Mon/Tue, but this week, they don't!
Rates spiked more than normal yesterday and then repeated the feat today. Combine that with weakness in underlying bond markets (which drive mortgage rates) that began on Tuesday afternoon, and the average lender is roughly an eighth of a percentage point higher in rate today. Freddie's headline of 4.04% is the stuff of dreams as far as most borrowers are concerned. While rates near 4.0% are available in some of the best cases, the average top-tier quote is now easily 4.125% and many lenders are up to 4.25%. If you're not putting 20% down or have less than perfect qualifications, it would be even higher.
Like yesterday, these are the highest rates in more than 9 months. Any time we're pushing long-term highs, it's a good idea to remain defensive in terms of locking vs floating. The saving grace is that long-term highs typically precede extended periods of positivity for rates. It's just a matter of figuring out if these long term highs are high enough to rebalance the scales in the bond market.
Loan Originator Perspectives
I probably sound like a broken record (for those who know what records are), but bond markets sold off (again) today, and treasury yields edged above prior resistance. The situation is getting serious, with rates now at least .25% above recent levels. If you got a rate quote a week ago, it's certainly no longer accurate. Lock early, unless you're closing so far out you can't lock yet without massive costs. -Ted Rood, Senior Originator
The trend is not our friend. With bonds breaking resistance, i think it is wise to strongly consider locking today. It appears inflation fears are driving rates higher, so until that passes it will be difficult for bonds to rally. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 4.125%-4.25%
- 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.