October 26, 2017
Mortgage rates are in a bit of trouble, having moved higher at the fastest pace since late June in the past few days. If you've had occasion to read an update on mortgage rates from most major media outlets today, the news is actually worse than you've heard. The most widely-cited source on any given Thursday is Freddie Mac's weekly Primary Mortgage Market Survey. While accurate over time, it doesn't account well for day to day changes when things are volatile--especially if those changes occur between Wednesday and Friday.
Unfortunately, Wed/Thu of this week have been worse than any other consecutive days in terms of upward rate movement. Whereas Freddie's survey suggests rates being roughly 0.06% higher versus last week, the average lender is offering rates today that are just over 0.125% higher compared to last Thursday. That's an abrupt move for a 7-day window any way you slice it.
What's driving this and what's the damage?
First off, the damage could certainly be worse. Rates are still near 4.0%, although many lenders are getting back up to 4.125% now, while the more aggressive lenders move up from 3.875% to 4.0% (for absolutely flawless scenarios).
As for the causes, that's complicated because we can talk about short-term and long-term motivations--both are open to some level of interpretation. In general though, we know that monetary (the Fed) and fiscal (the government) policy are both in focus. The selection process for the next Fed Chair is a major consideration for the bond markets that underlie mortgage rates as the Chairperson does more than anyone to set the tone for the Fed's rate-setting policy going forward. Fed rates, in turn, set the tone for momentum in broader bond markets.
On the fiscal side, both stocks and bonds are intently interested in whether or not lawmakers can pull off some iteration of tax reform. The details of any such reform matter greatly as far as markets are concerned, but in general, the more hopeful it looks, the better it's been for stocks and the worse it's been for rates.
For now, the rate trend is unequivocally higher, and you should assume that can continue to be the case until we have overwhelming evidence to the contrary.
Loan Originator Perspective
Another day, another round of bond market losses and worsened pricing. The trend continues to be higher rates, and there's no relief on the horizon. Lock early is still the safe bet. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.0-4.125%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2017 had 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.
- While rates remain low in absolute terms, they've moved higher in a more threatening way heading into the 4th quarter, relative to the stability and improvement seen earlier in 2017
- The default stance for now is that this trend toward higher rates has the potential to continue. It will take more than a few great days here and there for that outlook to change.
- For weeks, this bullet point had warned about recent stability inviting a bigger dose of volatility. That volatility is now here. As such, locking is generally the better choice until the volatility is clearly dying down.
- 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.