April 12, 2018
A day after hitting the lowest levels in more than 2 months, mortgage rates bounced back up today. The good news is that they didn't land too far from yesterday's levels in the grand scheme of things, and are still technically closer to the bottom of their March/April range.
Part of today's reversal had to do with the fact that bonds are caught up in market movements that follow geopolitical risk. Specifically, to whatever extent some sort of military confrontation with Syria and Russia looked imminent yesterday, rates benefited because some investors were seeking safe havens in the bond market. Excess demand for bonds pushes rates lower. When Trump pushed back on that notion overnight, the safe haven trade went the other way.
Syria is more of a diversion when it comes to rate movements. Granted, it could end up being a big deal, but it's just a talking point for now. The broader issue of the potential trade war has been doing more to influence stocks and bonds. Then today, the culmination of this week's Treasury auction process (scheduled sales of the government debt that drives interest rate momentum in the US) accounted for specific pressure on bond markets. The net effect was only as modest as it was because the bonds that underlie mortgage rates are a degree of separation removed from Treasuries. From there, mortgage lenders are another degree further removed. If we look directly at Treasuries, we see that it was the worst day of losses in over a month and thus, a warning about a potential shift in the relatively friendly rate momentum of late.
Loan Originator Perspective
The rubber band was stretched too far and has now snapped back. Lock at application until further notice. -Al Hensling, Mortgage Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.25%
- 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 beginning of 2018
- The scariest part of the move higher looks like it ended as of early February, and rates have been generally sideways since then
- Even so, the potential remains for more weakness (i.e. higher rates). It makes more sense to remain defensive (i.e. more inclined to lock) until we've seen a more convincing shift lower.
- 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.