January 29, 2019
Mortgage rates didn't move yesterday, despite a moderate amount of improvement in underlying bond markets. When bonds improve, rates tend to move lower, but there can be a lag for a few reasons. As we often discuss, bonds need to move by a certain amount during the day in order for lenders to go to trouble of changing their rate sheet offerings. If there hasn't been enough market movement, the typical practice is to simply wait to adjust rate sheets on the following morning.
All too often, when lenders wait to make such adjustments, the bond market will bounce back toward weaker levels, thus leaving mortgage rates unchanged, even when markets suggest otherwise. Other times, bond markets will continue moving in a friendly direction in the following day. That's what happened today, and it allowed lenders to price in yesterday's market improvement as well as a portion of today's.
In the bigger picture, rates have been operating in a fairly narrow range for the past several weeks. Upcoming events could nudge markets out of this range. One of the best candidates for such an event is tomorrow's Fed Announcement. To be clear, the Fed will not be making any changes to the Fed Funds Rate tomorrow, but they may take bigger steps to telegraph future policy changes than they have at previous announcements. Investors will be looking for clues in the verbiage released at 2pm Eastern time. As such, there's an increased risk of volatility in the afternoon.
Loan Originator Perspective
Bond markets rallied slightly as Wednesday's Fed Statement looms. Their commentary on the shutdown's economic impact will be scrutinized. Wednesday also brings employment data prior to Friday's January NFP report. I'm locking applications closing within 30 days. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 4.125%
- 5 YEAR ARMS - 4.25%-4.625% depending on the lender
Ongoing Lock/Float Considerations
- Headwinds that had plagued rates for most of the past 2 years began to die down in late 2018. A rapid decline in the stock market certainly helped drive investors into bonds (which helps rates) Highest rates in more than 7 years in Oct/Nov. 8-month lows by the end of the year
- This is a bit of a crossroads. The rising rate environment could flare up again. We may look back at Oct/Nov and see a long-term ceiling, or we may look back at early December and see a temporary correction before more pain.
- Either way, late 2018 was a sign that rates are willing to take opportunities presented to them. From here, it will be up to economic data, fiscal policies, and the stock market to decide on the next set of opportunities. The rougher the overall outlook, the better interest rates tend to do.
- 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.