October 11, 2018
Mortgage rates fell today as the stock market sell-off remained in focus. Stocks and rates certainly don't have a linear and predictable relationship, but when stocks move lower as quickly as they have over the past 2 days, rates tend to see at least some benefit. Even though yesterday's stock sell-off was much worse, today was a better day for rates due to timing. Simply put, the mortgage market didn't have quite enough time to adjust to the move in stocks before the close of business. Lenders who did change rates yesterday were somewhat conservative with those changes in the event stocks bounced back in a major way. When stocks failed to improve overnight, mortgage lenders passed along more of the improvements seen in the underlying bond market.
The average lender is now offering rates that are roughly in line with last Thursday afternoon. That makes them the lowest of the week, and it makes some mortgage rate headlines look a bit suspicious. Many of them suggest "rates have surged this week." That is indeed the case according to Freddie Mac's weekly rate survey, which is unfortunately relied upon by many journalists as their one key source for the one big article they write on mortgage rates each week.
It's unfortunate because Freddie's survey collects responses Mon-Wed and then publishes the findings on Thursday. I've long argued that those survey responses tend to heavily favor Monday and Tuesday rates. Last week's huge jump on Wednesday showed just how true that is.
So why is this a problem? For the casual reader who is simply keeping tabs on mortgage rates in general and who doesn't need to make any timely decisions or have any timely conversations with others on the topic, tracking Mon/Tue rates is no big deal. Over time, they'll have a fine idea of the general path.
The average reader of mortgage rate news, however, is either in the industry or in the market for a loan. Stale information is, at best, not helpful, and at worst, it can sow the seeds of distrust between consumers and loan originators. For instance, last Thursday's articles suggested rates were lower on Thursday while loan originators had to tell their clients just how quickly rates were rising. Now today, Freddie's Mon/Tue survey is reflecting the big rate spike just in time for actual rates to have fallen on Wednesday and Thursday.
Bottom line, if someone tells you rates are much higher than last week, feel free to say with 100% confidence that today's rates are only higher than rates seen during the first half of last week. From Thursday through today, they're roughly the same.
Loan Originator Perspective
Bond markets recouped Wednesday's losses today, and pricing improved moderately. We're basically back where we were Tuesday. For any borrowers currently floating, this is a decided opportunity to lock. We haven't had a multi-day rally in weeks, I'd hesitate to expect one here. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 5.0-5.125%
- FHA/VA - 4.5-4.75%
- 15 YEAR FIXED - 4.5%
- 5 YEAR ARMS - 4.25%-4.75% depending on the lender
Ongoing Lock/Float Considerations
- Rates continue coping with 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 (which certainly seems to be the case so far in 2018).
- While rates were able to recover and stay sideways in the summer months, September and October have seen a surge up to the highest levels in more than 7 years.
- Upward pressure can continue as long as economic growth and inflation continue running near long-term highs. Stay defensive (i.e. generally more lock-biased). It will take a big change in economic fundamentals or geopolitical risk for the big picture to change. Such things tend to not happen as quickly as we'd like.
- 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.