Mortgage rates were already having their worst week since 2016 as of yesterday afternoon. Rather than help to heal some of the damage, today's bond market momentum only made things worse. Whether we're looking at 10yr Treasury yields a broad indicator of longer-term rates or average mortgage lender offerings, this week now ranks among the top 3 in the past decade in terms of the overall move higher. At this point, we'd have to go back to the trauma of 2013's 'taper tantrum' to see anything bigger.
Few, if any, news articles or various mortgage rate indices have had a chance to catch up with the move. This is especially true of the widely cited Freddie Mac data that circulated yesterday. It indicated a 0.06% increase in rates from the previous week. It was already significantly outdated by yesterday afternoon, but the gap between there and reality is now truly staggering with the average lender's week-over-week jump hitting 0.30% by Friday afternoon.
I've heard a lot of talk and received more than a few questions about next week's Fed announcement. There seems to be a misconception about what the Fed rate cut can and can't do for mortgage rates. It's important to understand that the Fed absolutely does not set conventional mortgage rates nor would a rate cut from the Fed have an bearing on the mortgage world. That's because next week's Fed rate cut has ALREADY had a bearing on the mortgage world!
The Fed only meets to potentially change rates 8 times a year. The bond market that underlies mortgage rates, however, can change 8 times in less than a second. Markets have LONG since priced in the Fed's likely course of action (currently seen as 100% chance of a 0.25% rate cut). So when the Fed cuts rates next week, mortgage rates won't care. Instead, mortgage-backed-bonds will be more interested in what the Fed has to say about what it might do in the future, and that conversation could go either way. The bottom line here is that the Fed could cut its policy rate and mortgage rates could still move higher. This flow of events is not-at-all uncommon.
Loan Originator Perspective
Bond markets' beating continued today, as rates rose rapidly yet again. I can only recall one time in the last 10 years when we saw such a pronounced selloff, 2013" "taper tantrum." I'm locking all loans possible. We've breached multiple levels of support, and I'm not confident this will end anytime soon. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED -3.875%
- FHA/VA - 3.5%
- 15 YEAR FIXED - 3.375-3.5%
- 5 YEAR ARMS - 3.25-3.75% depending on the lender
Ongoing Lock/Float Considerations
- 2019 has been the best year for mortgage rates since 2011. Big, long-lasting improvements such as this one are increasingly susceptible to bounces/corrections and as of September, it looks like such a correction is underway
- Fed policy and the US/China trade war have been key players. 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 trade war updates. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars 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.