October 13, 2017
Mortgage rates moved lower today. For many lenders, it was the biggest drop in more than a month and it also brings them to the best levels in roughly a month. Others were more hesitant to make significant updates to today's rate sheets based on this morning's strength in bond markets (which underlie mortgage rates). If you're not seeing much of an improvement compared to yesterday at a specific lender, they're more likely to pass along that improvement if bond markets continue holding in current territory at the start of next week.
Just to be clear on how much improvement you might expect from a day like today, we're talking about roughly one quarter of 1 percent of the loan amount, expressed in terms of upfront cost. In other words, if your loan is $100k, then your upfront costs would have dropped by approximately $250 and your rate would have remained unchanged. For many borrowers though, today's improvement makes it possible to move down to the next lower interest rate. While this may mean upfront costs actually move a bit higher, that move would be offset by a 0.125% decrease in the rate itself (e.g. from 4.0% to 3.875%).
The catalyst for today's market movement was the Consumer Price Index--a key inflation report that plays a role in determining how aggressive the Federal Reserve might be in raising rates (or decreasing its monthly bond buying, which also has an impact on rates). When inflation is falling, or even if it's simply not rising as much as expected, rates tend to fall. At least that's true for stretches of time where bond markets are focused on inflation data, and 2017 is certainly one such stretch!
In the bigger picture, today's strength has a chance of confirming a shift back toward the lower rates that prevailed in the middle of the year. It definitely offered the strongest support of that possibility that we've seen since the most recent rate spike began in early September. At the very VERY least, it confirms that the aforementioned rate spike is over, and that's a victory even if rates don't subsequently surge back toward lower levels.
Loan Originator Perspective
If you floated through today's inflation data, you are being rewarded this morning with better pricing. I am not a fan of locking on Friday's as i feel lenders tend to be conservative with their pricing headed into a weekend. If you had the guts to float into today's economic data, i would continue to float and evaluate pricing on Monday. However, if the 10yr treasury note moves above today's opening of 2.32 i would go ahead and lock today. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 3.875-4.0%
- FHA/VA - 3.5%
- 15 YEAR FIXED - 3.25%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2017 has proven to be a relatively good year for mortgage rates despite widespread expectations for a stronger push higher after the presidential election in late 2016. Most of the rate spike was done by the end of 2016 and we've generally moved sideways to lower since then
- The biggest question is whether or not this counter-intuitive trend has an expiration date. Rates haven't been immune from brief corrections back toward higher levels, and each correction causes concern that the good times are over.
- Despite those concerns, we've seen rates make new lows in April, June, and September. Although rates have been rising since early September, they'd have to move even higher before we'd consider a change in the bigger picture theme.
- All of the above having been said, past precedent suggests we're due for a much bigger dose of volatility some time soon.
- 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.