Mortgage rates moved higher today, following the Fed's much-anticipated policy announcement.  Although the Fed changed quite a few words from the announcement's previous iteration (far more than normal), it wasn't the announcement itself that did the damage.  Rather, it was the Fed members' economic projections, which include an assessment of where the Fed Funds Rate will likely be at the end of the next few years.

Specifically, a few of the Fed members who'd been holding out for slightly lower rates in 2018 moved their forecasts up enough to increase the odds of a 4th rate hike by December.  This was already a strong possibility, but before today, those in the "3 hike" camp had a stronger case.

While the Fed's rate doesn't directly affect 30yr fixed mortgage rates, shifts in the Fed's rate hike outlook definitely do.  In the bigger picture, this was a fairly minor adjustment.  Moreover, rates markets were somewhat soothed by the press conference with Fed Chair Powell, which followed half an hour after the announcement. 

The net effect was a slight increase in rates that leaves us a little bit closer to the 7-year highs seen in mid-May.  Tomorrow morning brings more risk with the European Central Bank's policy announcement.  Big moves in either direction are a possibility. 

Loan Originator Perspective

With a Fed Rate hike today along with language indicating patient rate increases to continue into next year I would likely be locking all my loans at application.  In the near term the economy is chugging along nicely with inflation staying relatively benign although likely to continue to drift upwards.  While rates will likely not rise sharply and quickly I do think they will gradually rise a little bit over time.  So, trying to find a period where rates might fall (and that's possible in short time frames) the risk is certainly high and floating is dangerous in my opinion.  On a positive note, I think all the doom and gloomers predicting that rates will rise a lot over the next year are going to be wrong. I think the move will be small albeit in an upward direction.  For now though, if your closing is in the next 60 days, locking makes the most sense to me. -Hugh Page, Mortgage Banking Officer, SeacoastBank

Today's Fed Statement and Chairman Powell's press conference didn't sit well with bond markets today, as yields rose.  I've been locking early as possible,  this is precisely why.  It's a RISING rate environment,  gambling on rates dropping is less than astute. -Ted Rood, Senior Originator

Today's Most Prevalent Rates

  • 30YR FIXED - 4.625-4.75%
  • FHA/VA - 4.375%
  • 15 YEAR FIXED - 4.00%
  • 5 YEAR ARMS -  3.75-4.25% depending on the lender

Ongoing Lock/Float Considerations

  • Rates have been moving higher in a serious way due to headwinds that cannot be quickly defeated.  These include the Fed's increasingly restrictive monetary policy outlook, the increased amount of Treasury issuance to pay for the tax bill (higher bond issuance = higher rates), and the possibility that fiscal stimulus results in higher growth/inflation.

  • While we may see periodic corrections to the broader trend toward higher rates, it's safer to assume that broader trend can and will continue.  Until that changes, it makes much more sense to remain heavily-biased toward locking as opposed to floating.
  • 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.