At the end of last week, the average top-tier 30yr fixed mortgage rate quote was 4.375%. As of today, the exact same scenario would be at 4.125%--a quarter of a percentage point lower. That's an uncommonly big move for a single week, but it's one we've been tracking eagerly in recent days.
Why is it happening?
The first phase of the move had to do with the Fed's surprisingly friendly policy announcement on Wednesday. Due to the time of day that the Fed news came out, markets didn't have a chance to fully react to it until yesterday. Even so, the drop in rates was already much bigger than average. But this morning took it to the next level.
In the middle of the night (in the US, anyway), economic data for Europe was released that showed a serious slowdown in German and French manufacturing. The Fed has repeatedly cited European growth concerns as a reason for its aggressive policy changes, so the news was all the more meaningful. European bonds tanked by the time US markets opened ("tanked" in this context refers to rates moving lower). Early in the domestic trading session, US economic data was similarly weak, thus reinforcing another warning from the Fed about European weakness spilling over to the US.
With that, bond yields fell rapidly at home and abroad--to the point where there was a bit of a frenzied rush to buy (when traders buy bonds, rates move lower).
Will this continue to happen?
There's never any way to know if a certain move in rates is sustainable or susceptible to a quick bounce. In general, it will be up to the incoming economic data. After all, whether we're talking about Fed policy or the global growth implications themselves (both things that rates care about), it's the economic data that will cast the biggest votes.
Loan Originator Perspective
Bond markets (particularly treasuries) posted more gains today, as Brexit and potential EU economic concerns spooked investors. It's been a remarkable run since Wednesday as rates have dropped nearly. 25%. Can't blame those who want to lock in these gains, nor buyers who float cautiously here. Remember, pigs get fat, but hogs get slaughtered. Don't get too greedy! -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.125-4.25
- FHA/VA - 3.875-4.00
- 15 YEAR FIXED - 3.875%
- 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, their current outlook for rate hikes and economic growth, and their bond-buying policy shifts, we've all but certainly seen the highest rates of this economic cycle in late 2018.
- 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.