October 17, 2018
Mortgage rates moved higher at a quicker pace today, following the release of the Minutes from the most recent Fed meeting. But correlation isn't necessarily causality in this case.
The Minutes provide a more detailed account of the Fed meeting that resulted in September's rate hike. That rate hike was foregone conclusion and the Fed has been a relative open book in the intervening 3 weeks. In other words, there wasn't bound to be much by way of surprises. Even so, investors are always looking for clues in this more robust snapshot of the Fed's decision-making process. As such, it has the potential to cause some market volatility.
There was market volatility today--especially for bonds (which directly affect mortgage rates). It's debatable whether it was purely a function of the Fed. More likely than not, traders were predisposed to push rates higher for a variety of reasons and were simply waiting to make sure the Fed Minutes didn't offer any information that suggested a different strategy. After all, if a certain calendar event has the potential to cause volatility, it makes sense to avoid overcommitting until you can be sure the volatility won't be working against you.
In the bigger picture, today's bond market losses (aka "rate increases") were only moderate. Unfortunately, we were already fairly close to the long-term highs seen early last week.
Loan Originator Perspective
Today's Fed Minutes release hurt bond markets slightly, as inflation was mentioned 61 times. In any case, we're still holding near steady, in the midst of a rising rate trend. That means lock early, or don't complain about your rate when you do. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 5.0%
- 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.