September 25, 2018
Mortgage rates were unchanged for some lenders today while others were in slightly higher territory. Either way, that leaves the average lender at the highest levels in more than 7 years. For what it's worth, there are a few lenders that were slightly worse off for a day or two earlier this year. In terms of outright levels, the average top-tier scenario is being quoted 4.875% today.
Why so high? Part of the problem is ongoing. A strong economy is not good for rates and neither is additional government borrowing--both big issues in 2018. Those big issues go hand-in-hand with a Federal Reserve that is more willing to hike its policy rate and shrink its balance sheet. We'll get a fresh update on the Fed's outlook tomorrow, and indeed, that could be part of the reason that rates are staging at long-term highs.
Simply put, the economic data and the supply/demand seen in the bond market (government borrowing creates more supply) look like writing on the wall, spelling out another warning about ongoing policy tightening from the Fed ("tightening" = "higher rates," in general). Now we're just waiting for the Fed to confirm they're seeing what we're seeing. That will happen starting at 2pm tomorrow, and it could be a source of this week's biggest dose of volatility for rates.
Loan Originator Perspective
Bonds took yet another step back today, ahead of tomorrow's Fed announcement and press conference. Treasury yields rose to levels last seen the summer of 2011 amid expectations for a bullish Fed outlook. I've had a locking bias since last December, and rates continue to justify that. I'll lock new applications closing within 60 days until further notice. -Ted Rood, Senior Originator
In my opinion - big risk, little reward for floating. If your rate is there right now, better to lock and not worry about your rate. Yes pricing/rates may improve slightly, but not enough to make enough of a change for any significant gains. Seems greater risk of upward movement than downward. -Ira Selwin - VP of Capital Markets at US Mortgage Corporation
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.