May 7, 2019
Mortgage rates didn't move much today, if at all. This is confounding to all those who have watched rates against the backdrop of 10yr Treasury yields (and especially those who don't qualify their view that "mortgage rates follow the 10yr Treasury yield." Indeed, such a view must always be qualified with a word like "generally" or "typically." Today offers proof with 10yr yields significantly lower (more than 0.05%) whereas the average mortgage lender is unchanged.
What's up with this?
It is true that the bond market does more than anything to dictate mortgage rate movement. While 10yr Treasuries tend to correlate very well with the bonds that underlie mortgages, that correlation can periodically break down. When we look at actual mortgage-backed securities (MBS), we see they didn't fare nearly as well today as Treasuries. So this is a purely market-driven move for mortgage lenders (because they are almost exclusively concerned with MBS prices as opposed to Treasuries). The reasons for this are complicated, but temporary.
The bottom line is that mortgage rates were stuck in the mud today and they remain at risk of bouncing higher in the event that the recent spate of trade-related drama between the US and China can be patched up (that's the underlying news fueling the move in Treasuries). On the bright side, if rates do bounce back, it will almost certainly be a bigger deal for Treasuries (i.e. mortgage rates will be somewhat insulated, depending on the size and staying power of any potential rate spike).
Loan Originator Perspective
Bonds rallied slightly as stocks swooned again today, amid continuing trade tensions with China. My pricing was the best in a month, so no complaints here. I am locking loans closing within 30 days, floating those with more time. Next few days bring minimal economic data, it's all about Tariff Trauma now. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.25
- 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.