May 10, 2018
Mortgage rates bounced back today, following a weaker-than-expected report on inflation and a relatively strong 30yr bond auction. Rising inflation means that bond investors will receive future payments that won't buy as much as those same dollars would buy today. As such, when key reports show inflation is in check, bond investors are more willing to buy. A strong showing at the 30yr Treasury auction signals a similar willingness to buy bonds. Excess demand means higher bond prices and lower interest rates--all other things being equal.
With all of the above in mind, it's no surprise to see mortgage rates recovering from the damage that took them near the highest levels in more than 4 years yesterday. If you've seen one of the several mass media reports on Freddie Mac's weekly rate survey today, you may also have taken some heart in the fact that rates are "holding steady" versus last week. Unfortunately, that's not exactly the case.
While today's strength did indeed bring rates lower than yesterday, they remain higher than last week's average offering. The discrepancy is due to Freddie's survey methods focusing heavily on Monday/Tuesday rates whereas we're objectively tracking actual lender rate sheets every day. Could we soon end up back below last week's average? Certainly! But that's merely one of two possibilities, and the other is less pleasant to consider.
Bottom line: today is better than yesterday, but interest rates remain on the ropes.
Loan Originator Perspective
Well we got a weak CPI to go with a weak PPI yesterday. And still couldn’t break 2.95% on the 10 year. So stay defensive in your lock/float thoughts. Lately this close to 2.95 has proven to be a good spot to lock for deals closing in the near term. We’ll change our tune if we see sub 2.95% stick on the 10 year going forward. Time will tell. -Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC
Nice bounce but still locking at Origination. -Al Hensling
Today's Most Prevalent Rates
- 30YR FIXED - 4.625%-4.75%
- FHA/VA - 4.25%-4.5%
- 15 YEAR FIXED - 4.0%
- 5 YEAR ARMS - 3.625%-3.875% 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've been moving higher in a serious way due to headwinds that cannot be quickly defeated. These include the Fed's increasingly restrictive monetary policy outlook, 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.
- While we may see periodic corrections to the broader trend toward higher rates, it's safer to assume that broader trend can and will continue. Until that changes, it makes much more sense to remain heavily-biased toward locking as opposed to floating.
- 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.