March 12, 2018
Mortgage rates spent the entirety of last week at the same levels based on end-of-day rates sheets from the average lender. That was a tremendously uncommon length of time for rates to remain unchanged and it was especially notable against the backdrop of recent volatility. Today's rate sheet offerings came fairly close to extending the "unchanged" streak, but by the end of the day, lenders had improved just enough for the average to move 0.01% lower.
When we talk about 0.01% changes in mortgage rates, it's important to know that most lenders only offer rates in increments of 0.125%. That's a much bigger move than we see on the average day, so lenders need a way to make adjustments beyond the rate itself. They accomplish this with upfront costs and/or credits. For instance, lower the upfront cost (or increasing the upfront credit) by a couple hundred dollars could easily reduce the effective rate by 0.01% even though the payment rate (or "NOTE rate") remains unchanged.
Whereas today was fairly calm for markets and rates, tomorrow brings bigger risks. This is primarily due to the release of an important report on inflation in the morning. Inflation is one of the key threats to bonds, and bonds underlie interest rates. If inflation comes in higher than expected, it could easily push rates higher.
Loan Originator Perspective
Bond markets celebrated St Patrick's Day early today, with charts flashing green as pricing improved. Two Treasury auctions were well received. My pricing improved marginally from Friday's. Secondary departments are reticent to pass along all MBS gains to rate sheets when the gains typically disappear within a day or so, which is what we've been seeing this year. Locking early remains the safe strategy here. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.5-4.625%
- FHA/VA - 4.375%
- 15 YEAR FIXED - 3.875%
- 5 YEAR ARMS - 3.5-3.75% 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.