December 18, 2018
Mortgage rates fell today as lenders got caught up with the friendly move in the bond market that we noted yesterday. Incidentally, today's bond market movement was also friendly (i.e. it suggested rates should continue to move lower).
There's almost never only one reason that financial markets are doing whatever they're doing, even if there is frequently one reason that's bigger than the others. Both stocks and oil prices were high on the list of reasons for today's interest rate movement. When it comes to stocks, big losses frequently help rates (investors often seek safe-havens when stocks are panicking, and bond markets can be one of those havens. More bond buying = lower rates).
When it comes to oil prices, the relationship with rates is far less predictable, but when oil is falling rapidly, there's an undeniable implication for inflation. After all, if the primary energy source used to transport most of the country's commerce becomes less expensive, businesses can better compete on price. Beyond that, fuel prices themselves are a part of several important inflation metrics. Inflation is one of the building blocks of longer-term interest rates. When inflation expectations fall, rates typically fall as well--all other things being equal.
Tomorrow brings the much-anticipated Fed Announcement, including updated forecasts and a press conference with Fed Chair Powell. Between those three items, we could see plenty of volatility for rates tomorrow afternoon. A strong move in one direction or the other could even set the tone for the next 2 weeks.
Loan Originator Perspective
Both bonds and stocks rallied today, prior to Wednesday's Fed Statement and Chairman Powell's press conference. Daily rate sheets will come out tomorrow before Fed news, so I'm leaning toward floating new applications until tomorrow, since I can lock them (if prudent) when Fed news hits. -Ted Rood, Senior Originator
Bonds continue to hold onto recent gains but the 10yr is still unable to break to new lows. The FOMC announcement could be what pushes us to new lows, but i think i would lock here. We have rallied nicely and you should be seeing better offers today. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 4.75%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 4.25%
- 5 YEAR ARMS - 4.375%-4.875% depending on the lender
Ongoing Lock/Float Considerations
- Headwinds that had plagued rates for most of the past 2 years are slowly dying down. The rising rate environment could flare up again, and some headwinds remain in effect, but the broader tone has taken a more optimistic shift.
- Highest rates in more than 7 years in Oct/Nov. Lowest rates in more than 2 months as of early December
- This is a bit of a crossroads. We may look back at Oct/Nov and see a long-term ceiling, or we may look back at early December and see a temporary correction before more pain. Either way, it's one of the more hopeful positions we've been in for several years.
- 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.