January 7, 2019
Mortgage rates were higher again today, extending a 2-day move from the lowest levels since early 2018. The size and pace of the late 2018 improvements introduced the risk of a bounce even before last Friday's key events. But after those events, the correction has been fairly swift. Let's break those last two sentences down, as they contain a lot of implied information that isn't readily accessible without some background.
Rates are based on trading in the bond market. Like other markets, when momentum becomes lopsided, there's a risk of a correction. Momentum had arguably become lopsided in favor of lower stocks prices and interest rates heading into last week. That created one aspect of risk for low rates.
The other aspect of risk came from events that transpired on Friday. Bond markets (and thus, interest rates) are typically quite interested in the jobs report (which comes out on the first Friday of any given month) as well as critical update from the Federal Reserve. Last Friday contained a much-stronger-than-expected jobs report (not good for rates) as well as a speech from Fed Chair Powell that added upward pressure on rates.
By the time we combine the event-based pressure with the already-mounting momentum based risks, rates haven't wasted much time bouncing back toward higher levels. The only question is where this particular bounce will stop. Today's negative momentum isn't as severe as Friday's, but we'd need to see the upward momentum actually stop before assuming that the rates will be able to hold on to a majority of their late 2018 improvements.
Loan Originator Perspective
Bonds found their footing today, staying near Friday's levels. My pricing improved slightly. We're still near 8 month rate lows, but it's unclear whether rates have adequate motivation to rally further. 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 are slowly dying down. The rising rate environment could flare up again, and some headwinds remain in effect, but the broader tone has taken a more optimistic shift.
- Highest rates in more than 7 years in Oct/Nov. Lowest rates 8 months by the end of the year.
- This is a bit of a crossroads. 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, it's one of the more hopeful positions we've been in for several years.
- 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.