October 1, 2018
After hitting the lowest levels in exactly 2 weeks on Friday, mortgage rates bounced back up toward their recent highs today. This risk was already taking shape by Friday afternoon as the bond markets that underlie mortgage rates had deteriorated throughout the day. When bonds weaken enough during any given day, mortgage lenders are at risk of 'repricing' (revising the day's original rate sheet, effectively raising rates).
Even if bonds had merely held steady overnight, lenders still would have been forced to raise rates a bit today. But bonds managed to lose even more ground overnight, thus making for a more noticeable increase in rates compared to Friday afternoon. The net effect is that the average lender is now somewhere between the 2-week lows seen on Friday and the 7-year highs seen 3 days prior. As always, pricing strategies can vary considerably. Some lenders lost barely any ground because they'd priced more conservatively on Friday. Others are quite a bit higher because their Friday morning offerings were strong.
Loan Originator Perspective
Bond markets had a quiet October start, but employment data later this week could loom large. Bond yields seem quite content right where they're at, for the moment. With no apparent rate relief in sight, I'll continue locking new loans closing within 45 days at application, for all but the most risk-tolerant clients. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.75-4.875%
- FHA/VA - 4.5%
- 15 YEAR FIXED - 4.25%-4.375
- 5 YEAR ARMS - 3.75-4.25% depending on the lender
Ongoing Lock/Float Considerations
- Rates moved higher in a serious way due to several big-picture headwinds, including: the Fed's rate hike outlook (and general policy tightening), the increased amount of Treasury issuance to pay for the tax bill (higher bond issuance = higher rates), and the possibility that fiscal stimulus results in higher growth/inflation.
- Rates cooled off heading in the summer months, but that proved to be the eye of an ongoing storm. As long as economic data remains strong, rates can continue to move higher in general, even though there may be brief periods of correction.
- It makes sense to remain defensive (i.e. generally more lock-biased) because the headwinds mentioned above won't die down quickly. It will take a big change in economic fundamentals or geopolitical risk for the big picture to change.
- 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.