January 31, 2019
Mortgage rates fell more triumphantly today, extending their reaction to yesterday's Federal Reserve announcement. The Fed isn't in direct control of interest rates, although the opposite often seems to be true. The free market largely decides rates due to factors like growth, inflation, and supply/demand of bonds. That said, the Fed plays a big role in helping/hindering the natural economic currents. They adjust accordingly to try to keep the economy firing on all cylinders without inflation overheating and without big financial stability risks.
Yesterday's adjustment was fairly big and somewhat unexpected. Some of the market reaction may be due to the economic implications of the Fed's apparent concern. In other words, it could be seen as wake-up call about the economic risks underpinning the Fed's logic (and economic risks = lower rates, in general). But the fact that stocks have also improved today suggests markets are simply continuing to bask in the warm glow of a surprisingly friendly refocusing of the lens through which the Fed views the economy.
This second day of celebration has been a much bigger deal for the bond markets that underlie interest rates. Yesterday, we saw a nice move that may or may not have been real. Today, we rubbed our eyes and the same move was still in progress. Mortgage lenders adjusted their rate sheets accordingly. On average, conventional 30yr fixed rates/fees are as low as they've been since the first few days of February 2018. I'm OK with calling that a "1-year low" if you are.
Loan Originator Perspective
Bonds continued yesterday's rally today, and my pricing improved considerably. While rates may still rally further, it's sure tempting to lock here and take risk off the table before Friday's NFP. I'll lock February closings, wait on March's for the moment. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.375
- FHA/VA - 4.125 - 4.25%
- 15 YEAR FIXED - 4.0 - 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.