October 22, 2019
Mortgage rates recovered just a bit today after hitting the highest levels in more than a month yesterday. The inspiration for much of the recent upward pressure on rates can be traced to progress in Britain's attempt to exit the European Union (aka "Brexit").
It's not that Brexit is bad for interest rates. In fact, it's definitely been a positive influence off and on for nearly 4 years now. Rather, it's the manner in which Brexit is accomplished that matters to global bond markets, and thus, to interest rates. To be clear, European markets have seen the biggest effects, but there is some spillover in the US.
The most important consideration at present is whether or not the UK will leave the EU with or without a deal. A so-called "no deal" Brexit would be the better option for fans of low interest rates as the absence of the deal creates broader economic uncertainty. Interest rates tend to fall in response to economic uncertainty.
The likelihood of a "no deal" Brexit is slim, however. It wasn't necessarily as slim a few weeks ago, and that's precisely why rates have moved up during that time. If a deal looks like it's materializing, it would put upward pressure on rates, all other things being equal. Of course all other things aren't equal. Brexit-related events have simply been in focus over the past 2 weeks.
Loan Originator Perspective
Bonds traded within tight ranges today, as Britain voted yet again on the Brexit process. Still no clarity on exactly when/how that will happen. With both DC impeachment and Brexit drama in headlines, it feels like we'd need a real bombshell to push rates down much here. I'll continue to lock early on deals closing within 45 days. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED -3.75-3.875%
- FHA/VA - 3.375-3.5%
- 15 YEAR FIXED - 3.375-3.5%
- 5 YEAR ARMS - 3.25-3.75% depending on the lender
Ongoing Lock/Float Considerations
- 2019 has been the best year for mortgage rates since 2011. Big, long-lasting improvements such as this one are increasingly susceptible to bounces/corrections
- Fed policy and the US/China trade war have been key players. Major updates on either front could cause a volatile reaction in rates
- The Fed and the bond market (which dictates rates) will be watching economic data closely, both at home and abroad, as well as trade war updates. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will lead to new long-term lows.
- 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.