Mortgage rates moved higher again today as investors reacted to updates about the coronavirus outbreak.  This has been the dominant motivation for the big drop in rates over the past 3 weeks.  Mortgage rates are determined by the bond market.  When investors are worried about some negative impact on the global economy, bonds provide a safe haven to defend against risk and volatility.  Excess demand for bonds pushes rates lower.  As such, all the panic over coronavirus logically resulted in lower rates, but as of this week, things may be changing.

While there are still plenty of reasons to be concerned, the news cycle surrounding the outbreak has officially entered the "glimmer of hope" phase.  For example, a pharmaceutical company in China announced that it received approval to begin treating the virus with a cocktail of potent antiviral drugs.  The market treated that news as if a cure had been announced.  Stocks surged back toward all-time highs and bonds continued giving up recent gains.

As far as the average mortgage lender is concerned, we've seen the conventional 30yr fixed rate on top tier scenarios move up by about an eighth of a percent (.125%) over the past 2 days. That said, back on Monday morning, 3.375% was arguably the most prevalent top-tier quote.  In that light, a move up to 3.5% is far from the end of the world--especially when rates had been even higher than that for more than 3 months (not to mention, rarely under those levels... ever!).  More important than the outright level, however, is the fact that recent weakness could signal a shift in momentum--one that would make 3.5% look like a stellar deal several days or weeks from now.

Loan Originator Perspective

Bond markets posted small losses Wednesday, as ADP's January jobs projection trounced expectations.  The bigger report is Friday's NFP jobs, and if it mirrors ADP's, rates will rise.  I am locking loans closing within 45 days, see no upside in banking on rates dropping here. - Ted Rood, Senior Originator

Today's Most Prevalent Rates For Top Tier Scenarios 

  • 30YR FIXED - 3.5%
  • FHA/VA - 3.25%
  • 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 (and more recently, the coronavirus outbreak).  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 updates on other factors like trade and viral epidemics. The stronger the data the more rates could rise, while weaker data 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.