January 9, 2020
Mortgage rates moved higher more definitively today after as lenders had a chance to match their offerings to underlying bond markets. Markets themselves were already pointing to this move yesterday, but the lender response was still somewhat mixed in the afternoon hours.
More simply put, mortgage rates are based on the trading levels of mortgage-backed bonds. The bonds move first and then mortgage lenders follow by adjusting the rates they're offering to consumers. The adjustment typically happens at least once when the lender publishes rates for the first time on any given day. From there, markets need to move by a certain amount in order for lenders to realize any benefit to making a mid-day adjustment. Many lenders did that yesterday, but with trading levels getting even worse before this morning's opening rate sheets (for most lenders) the upward momentum in rates was much more noticeable.
Since we're talking about how the bond market leads the primary mortgage market, it's worth noting that bonds could some support today. Multiple lenders were able to adjust rates in a friendly direction, but the improvement wasn't quite enough to offset the losses of the past 2 days.
Tomorrow brings the typically important Employment Situation data (aka the "jobs report"). While this data isn't quite as much of a hot button as precedent suggests, it can still have a noticeable impact on rate momentum if it comes out much stronger or weaker than expected.
Loan Originator Perspective
Bond markets recouped a portion of yesterday's losses Thursday, and many lenders improved their pricing during the afternoon. If you're considering locking, I'd ask your loan officer if his pricing improved, and, if not, consider waiting until tomorrow AM. -Ted Rood, Senior Originator
After a weaker opening, bonds have managed to muster some gains and are now in positive territory. I have only heard of 1 lender repricing for the better. Tomorrow, we do get the jobs report which can move the markets. A weaker report might help bonds to improve further, but it is risky to float through this report. If you lender reprices better today, consider locking. If your lender does not, i think i would roll the dice and float over night. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates For Top Tier Scenarios
- 30YR FIXED - 3.75%
- FHA/VA - 3.375%%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.25-3.75% 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. 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.