May 3, 2019
Mortgage rates were flat today, which is a victory considering the big jobs report was stronger than expected. Typically, labor market strength--especially when seen in this particular report--is bad news for rates, but it didn't happen today. In fact, after a brief initial reaction, the underlying bond market actually improved (which is consistent with slightly lower rates, but it didn't improve quite enough for the average lender to go to the trouble of making that change today).
What's up with the paradoxical reaction? Two factors could be in play. First, bonds have spent the past two days moving higher in rate following Jerome Powell's press conference. The rebound in rates seen today could be more of a technical correction to those two days of pain. Beyond that, if markets are actually reacting to the jobs report, they could have a closer eye on the wage growth component, which was lower than expected. Economists are pretty sure we need to see wage growth accelerate in order for inflation to rise above the Fed's target. Until and unless that happens, the Fed has little reason to raise rates, and is actually seen as being slightly more likely to cut rates by December or January.
In other words, one of the jobs report's internal components could have been more important to traders than the jobs number itself. Again though, the improvement in the bond market was minimal today relative to the past 2 days. In general, we need to see a stronger commitment to break below the rate floor seen in April (you can watch 2.50% in terms of 10yr Treasury yields) before getting too optimistic about where rates might be going.
Loan Originator Perspective
Bonds posted modest gains today, despite a NFP report that surpassed expectations. We're still (unsurprisingly) firmed ensconced in our recent ranges, which is not a bad thing. I'm locking loans closing within 30 days, until a trend emerges, whether it's for the better or worse. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.25-4.375%
- FHA/VA - 4.0%
- 15 YEAR FIXED - 4.00%
- 5 YEAR ARMS - 3.875-4.25% 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, the bond market (which determines rates) will be watching economic data closely, both at home and abroad. The stronger the data, the more rates could rise, while weaker data could 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.