May 21, 2018
Mortgage rates held steady today, which is better than what could be said for most of last week when rates shot up to the highest levels in 7 years. Friday was the only day of improvement, but it was scarcely enough to undo the damage from the previous 4 days. That said, it did raise questions. Specifically, was Friday some sort of indication that the worst was behind us in terms if upward rate momentum?
Answering that question is tricky business because the time frame matters greatly. In the short term, there's always a possibility that a prevailing trend toward higher rates will cool-off and reverse course. While that's also technically possible over longer time horizons, we can begin to talk more about probabilities and less about random chance. With that in mind, we've be discussing the general momentum toward higher rates for many months now. Rest assured it will be big news when and if it changes.
Until then, assume that underlying risk of gradually higher rates remains intact, and that it will continue to be mitigated by periodic corrections toward lower rates. Unfortunately, in addition to being relatively less common, those friendly corrections haven't really helped rates make up much of the lost ground. As such, last week's same bottom line still applies: it will take a much bigger, much more sustained move in bond markets for lenders to make meaningful changes to mortgage rates. Until then, it makes sense to remain defensive in terms of locking vs floating.
Loan Originator Perspective
A little stability in the market is welcomed after comments on China Tariffs. Still locking at Application until further notice. - Al Hensling
Today's Most Prevalent Rates
- 30YR FIXED - 4.75-4.875%
- FHA/VA - 4.5%
- 15 YEAR FIXED - 4.25%
- 5 YEAR ARMS - 3.75-4.25% depending on the lender
Ongoing Lock/Float Considerations
- Rates have 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.