June 25, 2018
Conventional wisdom holds that interest rates tend to move in the same direction as stocks. This makes logical sense from a classical investment portfolio standpoint. If investors are selling stocks to buy bonds, the prices of stocks would fall and the price of bonds would rise. When bond prices rise, rates fall. But even with today's heavy losses in stocks, mortgage rates barely budged today.
The reality is that the "conventional wisdom" is far from bulletproof, even though there are lots of past examples that support it unequivocally. Beyond that, bonds are their own animal. If they have strong enough reasons to avoid going somewhere, it's going to take a very big move in stocks to get them to go somewhere else--bigger than we saw today.
The bonds that underlie mortgage rates are yet another degree removed from the stocks and bonds that investors are thinking of when that "conventional wisdom" is in play. In other words, sometimes the core bond market (like US Treasuries) is adhering to the conventional wisdom while mortgage rates are instead holding flat. That's essentially what happened today, and it keeps the average lender right in line with offerings from the past few days.
Loan Originator Perspective
Trade War instability continues to provide benefits to borrowers currently in the market to lock. Still advise locking at origination to avoid disappointment. -Al Hensling
Today's Most Prevalent Rates
- 30YR FIXED - 4.625-4.75
- FHA/VA - 4.25-4.5%
- 15 YEAR FIXED - 4.125%
- 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.