August 6, 2018
Mortgage rates were slightly lower for the 3rd straight business day, but not for any particular reason. Because of the relatively narrow range, rates are now technically as low as they've been since July 25th for the average lender. There are major caveats though.
Almost any scenario at almost any lender will not have changed enough during this time for the actual interest rate (the "note rate") to have changed. Rather, the upfront costs associated with any given rate have simply gotten modestly lower. For example, if you were being quoted 4.75% two weeks ago, you'd still be quoted 4.75% today, but you might have a lender credit (or lower lender costs) amounting to a couple hundred dollars, depending on the size of the loan.
There were no significant economic events on today's calendar and no major market movers in terms of headline news--at least not for the bond markets that underlie interest rates. That continues to be the case for the early part of the week, but things could pick up starting on Wednesday afternoon.
Loan Originator Perspective
Bonds posted small gains today, and appear to be solidly locked back in their recent ranges. At least last week's treasury yield push towards 3.0% appears to be behind us, for the moment. I'm not adverse to floating loans that are 30+ days from closing, but still recommend locking at the 30 day mark for all but the most aggressive clients. -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.