July 27, 2018
Mortgage rates were unchanged today, making for an anticlimactic end to a week that saw the sharpest rise in months. The lack of movement was all the more interesting considering the bond market's reaction to this morning's GDP data (bonds dictate rates).
Even though GDP came in at 4.1%, markets were widely prepared for such strength. Paradoxically, bonds improved, but only moderately. Even so, bond market improvement typically helps rates fall. Today was a bit of an exception for 2 reasons. First, bonds lost ground yesterday afternoon, but not enough for most mortgage lenders to raise rates in the middle of the day. As such, they were left to begin today at a slight disadvantage. Beyond that, the bonds that underlie mortgages specifically didn't improve as much as US Treasuries.
Next week brings a slew of important economic reports and calendar events including the big jobs report and a policy announcement from the Fed. While the Fed isn't expected to make any changes to rates, Fed Chair Powell will be holding a press conference. This will give him a chance to address market speculation about the President's recent comments on Fed policy and the need for low rates.
Loan Originator Perspective
Bonds closed out the week with a whimper, remaining near unchanged throughout the day. Next week promises more excitement, with inflation and labor market data. I'm still locking early, this market shows scant motivation to improve significantly. -Ted Rood, Senior Originator
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.