July 25, 2018
Mortgage rates began the day in a fairly hopeful way. Underlying bond markets were just slightly stronger and a few lenders offered modest improvements over yesterday's latest offerings. Things began to change in the afternoon following news that Trump and the EU's Juncker struck a deal to avert a trade war between the US and EU.
This hurts rates largely because the threat of additional trade tensions is one of the things that's been helping rates. As such, any development that helps ease trade tensions runs the risk of putting upward pressure on rates.
Several lenders have already recalled rates sheets and published higher rates this afternoon. More could join them in the last few hours of business. While we're not talking about massive changes here, every little bit hurts considering rates are already operating near their highest levels in more than a month.
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 moved higher in a serious way due to several big-picture headwinds, including: the Fed's rate hike outlook (and general policy tightening), 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.
- Despite those headwinds, the upward momentum in rates has cooled off heading into the summer months. This could merely be the eye of the storm, or it could end up being the moment where markets began to doubt that prevailing trends would continue.
- It makes sense to remain defensive (i.e. generally more lock-biased) because the headwinds mentioned above won't die down quickly. Temporary corrections can be explained away, but it will take a big change in economic fundamentals or geopolitical risk for the big picture to change. While that doesn't necessarily mean rates have to skyrocket, there's a good chance it means rates will struggle to move much lower than early 2018 lows until more convincing motivation shows up.
- 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.