December 11, 2019
Mortgage rates improved today following the Federal Reserve's policy announcement and Fed Chair Powell's press conference. The Fed doesn't set mortgage rates (their policy rate applies to 1-day loans between banks whereas mortgages obviously last a lot longer). But the Fed's monetary policy stance can definitely cause volatility in the broader bond market (which DOES impact mortgages). That was the case today and the impact was positive.
Markets correctly assumed that the Fed would neither hike nor cut its policy rate. That wasn't the source of inspiration. Rather, it was comments from Fed Chair Powell during his press conference. Simply put, the Fed is prepared to keep rates lower for longer in an attempt to keep inflation slightly higher than they ultimately want it to be. Their reasoning is that this is healthier for the economy in the longer-run because inflation had been operating well under the Fed's target for so long after the Financial Crisis.
Today's move in the bond market wasn't out of line with many other recent days of random movement. It was just much more interesting because it wasn't random! Most borrowers will see the improvement in the form of slightly lower upfront costs (i.e. it wasn't a big enough day for mortgage lenders to lower rates by the traditional 0.125% increment).
Loan Originator Perspectives
Following the FOMC announcement and press conference, bonds are managing a nice little rally. With bonds moving in the right direction, i favor floating overnight to allow time for lenders to pass along the gains. Pretty late in the day to see many reprices today. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates For Top Tier Scenarios
- 30YR FIXED -3.75 - 3.875%
- FHA/VA - 3.375%
- 15 YEAR FIXED - 3.375%
- 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.