Mortgage rates fell modestly again today.  Over the past 2 days, we've managed to undo more than a week of damage, with rates back at their best levels since September 17th.  That may sound a bit more exciting than it actually is, however.  Many prospective borrowers would still be quoted the same rate over the past 3 days with the improvements limited to the 'upfront cost' side of the mortgage cost equation.  

All of the above runs counter to many of the mortgage rate headlines floating around the web and airwaves today.  The average headline suggests rates are as high as they've been in 7.5 years, followed by some iteration of 'all hope is lost.'  OK, so perhaps not every headline put it so dramatically, but you get the idea.

Why are the majority of headlines telling you one thing while I'm telling you another?  Easy!  I'm right and they're wrong!  No... I'm not trying to be funny.  It's that simple.  But it would be a good idea to quantify such grandiose statements.  Things become more understandable and more boring with the details.

Simply put, this is a repeat of the same old pattern we often see on Thursdays.  That's the day of the week that Freddie Mac releases the results of their mortgage rate survey--an email that goes out to loan originators asking them what they would be quoting for a few different mortgage rate scenarios.  The survey is accurate in the long run, but the issue is that responses are heavily weighted toward Monday and Tuesday each week (and only accepted through Wednesday).  Thursday and Friday don't even get counted.  Additionally, we have more than enough evidence over the years to conclude that Wednesday afternoons don't make the cut either.  That means NONE of this week's improvement in mortgage rates was counted because all of it occurred after yesterday afternoon's Fed announcement.

The fact is that 7-year highs already happened last week and now, the survey-based data finally caught up.  While we can't know for sure if today's rates will be intact on Monday morning, if they are, we can assume next week's Freddie survey will convey a nice little rebound in mortgage rates.  

Loan Originator Perspective

Bond markets retained yesterday's gains (which is good), but failed to build on them today (which is not good).  My pricing improved marginally from yesterday morning's.  I locked a couple of loans that I floated overnight, it's still apparent that the trend is not our friend.  I'm locking loans closing within 45 days at application for all but risk-craving clients. -Ted Rood, Senior Originator

You must continue to be cautious in this market as the trend is still not our friend.   With the 10 year moving back above 3.05, i feel it is wise to lock in.  If we can fall back below 3.05, then floating might pay off but we do get inflation data tomorrow morning.  Higher inflation will send rates higher, so if you want to float you need to hope for lower than expected PCE. -Victor Burek, Churchill Mortgage

Today's Most Prevalent Rates

  • 30YR FIXED - 4.75-4.875%
  • FHA/VA - 4.5%
  • 15 YEAR FIXED - 4.25%-4.375
  • 5 YEAR ARMS -  3.75-4.25% depending on the lender

Ongoing Lock/Float Considerations

  • Rates moved higher in a serious way due to several big-picture headwinds, including: the Fed's rate hike outlook (and general policy tightening), 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.

  • Rates cooled off heading in the summer months, but that proved to be the eye of an ongoing storm.  As long as economic data remains strong, rates can continue to move higher in general, even though there may be brief periods of correction.

  • It makes sense to remain defensive (i.e. generally more lock-biased) because the headwinds mentioned above won't die down quickly.  It will take a big change in economic fundamentals or geopolitical risk for the big picture to change.  
  • 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.