February 9, 2018
Mortgage rates experienced some ups and downs this week (mostly ups), but ultimately weren't able to capitalize on a few attempts to move lower. Monday's initial rate sheets were the highest in years, but they were soon superseded by afternoon improvements that followed the massive stock sell-off. Rates will often improve during a day where stocks are panic-selling because panicked dollars need safe havens to hide out in. The bond market (the thing that dictates rates) only got a small fraction of the safe-haven demand created by the stock rout. Add the volatility and confusion into the mix and lenders weren't too interested in making huge changes to rate sheets.
From there, the rest of the week never saw anything as promising for the rate outlook. Wednesday afternoon and Thursday morning were especially bad, bringing rates to even higher 4-year highs than seen on Monday morning. The underlying bond market was able to hold its ground without any new highs in 10yr Treasuries. Mortgage rates closely track 10yr Treasury momentum, but this week provided a good example of how the two can vary. To be clear, mortgage rates made a new high in the middle of the week while 10yr Treasury yields did not.
In terms of rate momentum for analytical purposes and forecasting, Treasuries do much more to set the tone than mortgage rates. As such, that ground-holding in Treasuries MIGHT be a positive sign, but no one should treat it as such from a lock/float standpoint. We have too many recent examples of rates seemingly leveling off only to break higher . In any event, next week's inflation data (Consumer Price Index) could dictate the next big move it comes in very far from expectations.
Loan Originator Perspective
Bonds caught a small rally this afternoon, and a few lenders improved their morning rate sheets, but we're still at the worst levels since early 2014. You've heard it repeatedly, but here it is again: The trend is NOT our friend, and until it is, locking early is the only way to remove risk from the equation. Happy Friday. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.75%
- 5 YEAR ARMS - 3.375-3.75% 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.