August 21, 2018
Mortgage rates were generally unchanged again today although several lenders were in just slightly better territory. That makes this the 8th straight business day with almost no change in mortgage rates. During that time, underlying bond markets have improved slightly. Normally, those improvements would translate to modest improvements in rates, but lenders are waiting for a bigger breakout that, thus far, has failed to materialize.
If there is an event on the near-term horizon that will prompt such a breakout, it's not clear what it will be. Tomorrow brings the occasionally-important Fed Minutes release. This isn't a new policy announcement, nor is it a venue for the Fed to make any changes to rates or bond buying protocol. Rather, it's just a detailed account of the Fed meeting that took place 3 weeks ago. That meeting was fairly ho-hum, best we can tell from the policy announcement that followed, but there's always some chance that the Fed talked about something that will change the way investors feel about interest rate risks going forward.
Loan Originator Perspective
Bonds hung in recent ranges today, and my pricing mirrored Monday's. Looks like rates are very content where they're at, not surprising for late summer trading. I'm not sure we're going to see a continued rally, barring further economic/geopolitical motivation, and am locking loans within 30 days of closing. -Ted Rood, Senior Originator
With the improved pricing on my rate sheets today, my clients are favoring locking. Bonds appear to be bouncing off of resistance at 2.82, so now is the time to lock. -Victor Burek, Churchill Mortgage
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.