March 21, 2019
Granted, we're not back to the sub-4% mortgage rates that dominated much of the past 8 years, but breaking into the high 3% range is a valid consideration after the past few days. Yesterday's surprising Fed news hit the rates that were already holding near their lowest levels in well over a year. The net effect has been a decisive break lower with the average lender easily able to offer 4.375% on a typical 30yr fixed scenario. Many lenders are at 4.25%, and the interesting thing about 4.25% is that it currently doesn't cost much more to buy your way down to the next lower rate: 4.125%.
All of the above has to do with the upfront prices associated with interest rates. For instance a lender is going to earn more money from a 4.375% rate than a 4.25% rate, so they're willing to pay a bit more to get it (which means a borrower wouldn't need to pay as much in terms of upfront costs in a scenario that's otherwise apples to apples). Based on today's average rate sheet, it would cost about half a point ($500 for a 100k loan) to drop your rate from 4.375% to 4.25%. But to get to the next rung lower (4.125), it would only cost another $170-200.
Paying that money upfront is going to save you $7/mo, which means you'll break even in 24 months. Even if you're starting from 4.375% and looking at buying the rate down to 4.125%, it would only take about 4 years to break even, on average. Personal preferences vary when it comes to buying down one's rate (especially considering an unfortunate negative stigma surrounding the practice of "paying points"), but it's certainly another option to consider. Generally speaking, it makes more sense for those who aren't planning on moving or refinancing any time soon.
As far as rates' ability to maintain or press farther into long-term lows, we're taking things one day at a time. That said, this is now the most convincing argument we've seen for "lower rates in 2019." The only thing that would really derail the positive momentum would be stronger economic data at home and abroad in the coming weeks.
Loan Originator Perspective
Bond traders digested yesterday's big Fed news, and both MBS and treasuries retained yesterday's robust gains. Since it typically takes a few days for market improvements to hit rate sheets, my pricing improved today. Folks close to closing could sure do worse than locking here, but I'm not in a hurry to lock files closing in May and beyond. The trend is still our friend. -Ted Rood, Senior Originator
If you floated through FED yesterday, well done. The announcement was very dovish and friendly for rates. With the decent improvement on rate sheets today, i think it would be wise to go ahead and lock in these gains. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 4.375%
- FHA/VA - 4.0-4.125%
- 15 YEAR FIXED - 4.0 - 4.125%
- 5 YEAR ARMS - 4.25 - 4.625% depending on the lender
Ongoing Lock/Float Considerations
- Early 2019 saw a rapid reevaluation of big-picture trends in rates and in markets in general
- The Federal Reserve has been a key player, and while they aren't the ones pulling the global economic strings, their response to the economy has helped rates fall more quickly than they otherwise might.
- Based on the Fed's laundry list of concerns, their current outlook for rate hikes and economic growth, and their bond-buying policy shifts, we've all but certainly seen the highest rates of this economic cycle in late 2018.
- 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.