First things first: the Fed cut its policy rate today, but that doesn't mean they cut mortgage rates. Why? Because they can't and they don't--especially not by a whopping 0.25% in a day (an amount that may be seen once or twice per decade when it comes to a single day's change in mortgage rates). Case in point, mortgage rates for almost any lender are almost exactly where they were yesterday.
All that having been said, the Fed does SAY things that are important to the bond market that underlies rates. That verbiage can always push mortgage rates in either direction regardless of the direction that the Fed moves its own policy rate. In today's case, the Fed's verbiage was a bit friendlier than the market was prepared for. As such, both stocks and bonds improved in the afternoon. The average mortgage lender (as of 1pm ET, anyway) has not yet adjusted its mortgage rate offerings to reflect the bond market improvement.
Keep in mind, that bond market improvement isn't anywhere remotely close to 0.25% in terms of mortgage rates. It won't even be 0.125%. That means the average borrower isn't likely to see any change in quoted rates tomorrow morning, but in certain scenarios, the upfront costs could be slightly lower. The important thing to understand is that it was not the Fed's rate cut that is affecting the bond market and the bond market hasn't moved enough to earn mortgage rates more than a token improvement. It's also important to understand that if bonds weaken enough overnight, rates could actually be worse in the morning!
Loan Originator Perspective
Today's Fed Statement contained few surprises, and bond markets retained their AM gains after its release. Rates appear reluctant to break mid-September's highs, which is encouraging. With potential tariff and Brexit resolution looming, I'm still locking my November deals, and some of early December's as well. - Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED -3.75-3.875%
- FHA/VA - 3.375-3.5%
- 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
- 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.