September 11, 2018
Mortgage rates held fairly steady this morning, keeping them in line with the highest levels since early August. As the day progressed, underlying bond markets weakened. This implies higher rates tomorrow or, for some lenders, a late day change to today's rate sheet offerings. The changes aren't severe, but at recent highs, every little bit hurts. If the next 5 days are anything like the past 5 days, we'd be looking at the highest rates since 2011! In other words, we may not be moving too much, but the outright levels continue to be unpleasant.
There were no specific motivations in financial markets to account for today's bond market weakness. That said, there is anxiety about events coming up in the rest of the week. These include economic reports (like the inflation data tomorrow and Thursday), bond auctions (supply = lower bond prices = higher rates), and a policy announcement from the European Central Bank. If all of the events were to go against us, rates could easily move to new long-term highs. If they don't, there's a chance we'll catch a break by Friday.
Loan Originator Perspective
Bond markets' sell-off continued today, and treasury yields are now at their highest since early August. I've been locking all new applications closing within 45 days, but may consider moving that timeline out to 60 days. The trend is not (NOT) our friend, and that doesn't appear to be changing anytime soon.
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.