September 19, 2018
Mortgage rates are in bad shape. At some point in the past 3 days (depends on the lender), top tier 30yr fixed rate offerings hit their highest level in 5 years, then 7 years. For the first time since 2011, the most prevalent top tier rate is 4.875% (meaning a handful of lenders are at 4.75% or 5.0%). If this trajectory holds, the average lender would be at 5% next week.
In order to make the past few days relevant for anyone who reads this, let's focus on the CHANGE between today's average rates and those seen less than a week ago. From Friday the 14th, the average 30yr fixed quote is an eighth of a percentage point higher (.125%). While we've seen moves that big in the past, with only 1 or 2 exceptions, we haven't seen anything like it in 2018. And when we consider that it takes rates to their highest levels in 7 years, it's even more troubling.
Keep in mind that Freddie Mac releases its weekly mortgage rate survey tomorrow, which tends to be heavily weighted for Monday and Tuesday's rates. As such, there will be a barrage of headlines that say rates moved higher this week, but they likely won't capture the full extent of the move.
As for underlying motivations behind the move, we talked in more detail about that yesterday. Check it out.
Loan Originator Perspective
Bonds' recent swoon continued today, albeit at a slightly slower pace. Markets are oversold, which COULD indicate they're due for a reversal soon, but I don't see signs of that yet. I'm locking all new applications closing within 60 days. Folks building houses need to seriously consider longer term locks, especially if a float down option is available. -Ted Rood, Senior Originator
Been a rough couple weeks for rates and really brutal over the last couple days. Hopefully, you were able to lock in already and avoid yesterday's and today's continued slide. At this point, the damage is done and my rate sheets reflect slightly worse pricing than the market move justifies. This is common when bonds are selling off in large fashion. So, i think floating overnight and re-evaluating tomorrow is worth the risk but only do so if you can afford to be wrong. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 4.75-4.875%
- FHA/VA - 4.5%
- 15 YEAR FIXED - 4.25%-4.375
- 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.
- Rates cooled off heading in the summer months, but that proved to be the eye of an ongoing storm. As long as economic data remains strong, rates can continue to move higher in general, even though there may be brief periods of correction.
- It makes sense to remain defensive (i.e. generally more lock-biased) because the headwinds mentioned above won't die down quickly. It will take a big change in economic fundamentals or geopolitical risk for the big picture to change.
- 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.