Mortgage rates began the day in decent shape after more trade war drama courtesy of a Reuters story overnight. In general, trade war drama pushes stock prices and bond yields (aka "rates") lower. But as we discussed yesterday, mortgage rates hadn't been able to benefit from that drama nearly as much as US Treasuries (the benchmark/yard-stick against which all other US interest rates are compared). In fact, they were very close to unchanged even though Treasuries were making a case for a nice move lower.
It looked like that might change this morning as Treasury yields continued lower and the bonds underlying mortgages managed to improve modestly. Indeed, a few lenders did offer rates that were just slightly better than yesterday, but they were counterbalanced by just as many lenders on the other side of the fence. Insult was soon added to injury when the overall bond market began to weaken. The losses (which equate to higher rates) were steady at first, but kicked into higher gear after a lackluster 10yr Treasury auction (a scheduled sale of bonds that speaks to investor demand, thus causing some volatility on occasion).
In the event of a move higher in rates, we didn't expect mortgage-backed bonds to move as much as Treasuries. That was thankfully true today, but they were nonetheless dragged into weaker territory. This resulted in several lenders issuing mid-day reprices. Lenders who kept the same rate sheets all day will be under some pressure to raise rates slightly tomorrow morning, unless overnight bond market movement is very friendly.
Loan Originator Perspective
Bonds sold off mid-day following an extremely weak 10 year Treasury auction. Granted, the losses weren't calamitous, but enough to break rates' weak downward trend. We'll get some inflation data tomorrow/Friday. I'm locking loans closing within 30 days.-Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.25
- FHA/VA - 4.0%
- 15 YEAR FIXED - 4.00%
- 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, the bond market (which determines rates) will be watching economic data closely, both at home and abroad. The stronger the data, the more rates could rise, while weaker data could 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.