Mortgage rates fell convincingly today, though not all lenders adjusted rates sheets in proportion to the gains seen in bond markets (which underlie rate movement). Those gains came early, with this morning's economic data coming in much weaker than expected. Markets were especially sensitive to the Consumer Price Index (an inflation report) which showed core annual inflation at 1.7% versus a median forecast of 1.9%.
Core annual inflation under 2.0% is a hot topic--especially today--considering that's one of the Fed's main goals. This afternoon's Fed Announcement did acknowledge the recent drop in inflation, but continued to suggest it was being held down by temporary factors. The Fed also officially unveiled its framework for decreasing the amount of bonds its buying (though it didn't announce a start to the program yet).
Bottom line: Fed bond buying is one of the reasons rates are as low as they are. Markets know the Fed will eventually enact this plan and they've accounted for that to the best of their ability. But as the Fed actually goes through the steps toward enacting the plan, it causes some upward pressure for rates. That was the case this afternoon, but bond markets were nonetheless able to hold on to a majority of improvement seen this morning. As such, the day ended with most lenders offering their lowest rates in exactly 8 months ( a few days following the presidential election).
Loan Originator Perspective
Weak data has helped bonds rally nicely today. With no surprises from Yellen's testimony today, I think floating overnight is the way to go. This will give lenders time they need to pass along the gains. If you are risk adverse and want to lock today, then you should wait as late as possible to see if your lender improves pricing. -Victor Burek, Churchill Mortgage
Bonds posted robust gains this morning, as weak inflation data demonstrated the US economy faces continuing challenges. The Fed raised their overnight rate this PM, surprising no one. MBS prices and treasury yields are virtually unchanged post-Fed Statement, a bullish sign for future rates. The lack of inflation is a definite boon for bonds, and may spark a move to lower rates. If you floated until now, wait for tomorrow's pricing before considering locking. I'm inclined to float new loans. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 3.875
- FHA/VA - 3.5-3.75%
- 15 YEAR FIXED - 3.125-3.25%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Investors were relatively convinced that the decades-long trend toward lower rates had been permanently reversed after Trump became president, but such a conclusion would require YEARS to truly confirm
- Instead of continuing higher in 2017, rates instead formed a narrow, sideways range, and held inside until April. Investor perceptions are shifting such that fiscal reforms and other policy developments will need to live up to expectations in order to push rates higher. Geopolitical risks would also need to avoid flaring up (more than they already have)
- For the first time since the election, we're in a rate environment where you wouldn't be crazy not to lock at every little opportunity/improvement. Until/unless it's broken, the highest rates of early-2017 mark the ceiling, and we're now waiting to see how much lower we can go from here.
- 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.