January 21, 2020
Mortgage rates dropped to begin the holiday-shortened week as markets expressed a bit of panic over the coronavirus outbreak in China. This is similar to the SARS outbreak in 2003, which certainly had an impact on both stocks and bonds. While it's too soon to know if the new iteration of the disease will run a similar course, it's not too soon for markets to begin heading in that direction preemptively.
Specifically, fears surrounding the outbreak lead investors to expect commerce, in general, to take a hit. Sure, the average person may not change their daily routine because of Coronavirus, but many will (and have). A decrease in the level of commerce implies lower stock prices. Simultaneously, investors can seek safe havens for their money in the sovereign bond market (such as US Treasuries).
When investor demand for Treasuries increases, rates fall. The mortgage-backed securities (MBS) that underlie mortgage rates are an indirect beneficiary as they tend to follow Treasuries at times like this, even though the magnitude is typically lower.
This unexpected surge of bond-buying demand (again, higher demand for bonds = lower rates, all other things being equal) brought the average mortgage lender back in line with their lowest rate offerings since early October.
Loan Originator Perspective
Bond markets posted moderate gains Tuesday, as CDC announced a US coronavirus case. Rates are very near their 30 day lows, and we might have room to run further, particularly if additional cases are discovered. I am floating new loans overnight, think tomorrow's pricing will be better than today's. -Ted Rood, Senior Originator
We are near the bottom of the range right now and I don't think there is much room for improvement. There's always the chance we're going to break into a new lower range but I doubt. - Jason Anker, Loan Officer
Today's Most Prevalent Rates For Top Tier Scenarios
- 30YR FIXED - 3.625 -3.75%
- FHA/VA - 3.375%%
- 15 YEAR FIXED - 3.25 - 3.375%
- 5 YEAR ARMS - 3.25-3.75% depending on the lender
Ongoing Lock/Float Considerations
- 2019 was 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.