August 21, 2019
Mortgage rates moved higher today, and it had nothing to do with any of the day's events or news headlines. Quite simply put, the bond market (which dictates the rates that can offered by lenders) had already begun to weaken as of yesterday afternoon. Weakness continued overnight as global financial markets dialed back their demand for safe havens.
In market terms, a safe haven is generally a lower rate of return with a higher guarantee of the return remaining stable. Fixed rate government bonds from financially solvent countries are a classic safe haven. And no matter what you've heard in the news, the US mortgage market is also squarely in the safe haven camp. The only major risk associated with mortgages as far as investors are concerned is how long the mortgage will last. That uncertainty surrounding cash flow time-frames means mortgage rates are higher than Treasury yields with comparable life-spans. Nonetheless, investors know the average life span of a pool of vanilla mortgages will be 5-10 years. They know they'll get their principal and interest back. Therefore, it's a safe haven (unlike a stock that could easily lose money if it the stock declines in value).
Safe haven demand has been waxing and waning as the broader market settles in to a new range following the big shake-up in early August. Today was just another minor fluctuation in that regard, but the timing issue (bond market weakness yesterday afternoon followed by more this morning) made for a noticeable adjustment from mortgage lenders. The next big potential flashpoint will be Friday's Jackson Hole speech from Fed Chair Powell.
Loan Originator Perspective
Choppy Ride continues. Currently locking at origination to avoid disappointment. -Al Hensling
Today's Most Prevalent Rates
- 30YR FIXED - 3.5 - 3.625%
- FHA/VA - 3.25-3.5%
- 15 YEAR FIXED - 3.125 - 3.375%
- 5 YEAR ARMS - 3.375-3.75% 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
- 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.