July 31, 2018
Mortgage rates fell modestly today, bringing them back in line with last Friday's levels. Most of the inspiration for the improvement came from overnight developments in Japan, where the country's central bank doubled down on its commitment to keep easy money policies flowing for an extended period of time. In general, when large central banks commit to maintaining such policies, it's good for interest rates. Last night was no exception, but much of the benefit went to Japan's bond market (unsurprisingly) with US markets just getting a small token of the gains.
It should be noted that by the time such news filters through to the world of mortgage rates, the improvements are barely detectable for the average borrower. Many mortgage seekers will be seeing the exact same quote compared to yesterday. Those who see better quotes will almost certainly still be seeing the same interest rate, but with marginally lower upfront costs (something around $100 for every $100k financed).
From here on out the rest of the week is busier in terms of scheduled events that could impact rates. The potential for volatility is higher, culminating with Friday's big jobs report. Bottom line: rates are already near the highest levels in more than 2 months, but if the incoming economic data isn't 'rate-friendly,' they could keep moving higher.
Loan Originator Perspective
Bond markets posted small gains today as traders eyed tomorrow's Fed Statement and Chairman Powell press conference. Today's inflation data was slightly below expectations, which boosts bonds. I don't expect any surprises tomorrow, and will continue locking sooner rather than later. -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.