December 12, 2017
Mortgage rates moved modestly higher for the 4th straight business day today. Last Wednesday saw the best levels in a month with some lenders in the best shape since early September. The recent move higher brings rates back into the higher part of the prevailing range.
If that all sounds somewhat dramatic, it's not. The "prevailing range" is so narrow that it barely bears mentioning. In fact, quite a few loan scenarios would be quoted the same "note rate" on any day in the past several months. Why, then, are we talking about rates "moving?" Technically, it's the "effective rate" that's moving because lenders use upfront costs to make finer adjustments to the cost of financing.
In other words, if two people are quoted 4.0%, and everything about the quotes is the same except for a $200 difference in lender fees, the person who paid $200 less upfront technically has the lower rate, even though their payments will be the same.
While the prevailing range has been narrow, there are never any guarantees it will stay that way. Tomorrow brings a few threats to the recent stability, for better or worse. There is important inflation data in the morning. A weaker reading could help rates start the day lower, but a stronger reading could lead to a challenge of the recent upper boundaries. Then the Fed Announcement is released in the afternoon, along with an updated set of Fed forecasts. Markets already know the Fed is going to hike rates, but the Fed's future rate hike outlook is the more important info this time around.
Loan Originator Perspective
The trend is not our friend right now. There is solid support just over head of current levels which will hopefully prevent rates from moving any higher. With the Fed on tap tomorrow, it is highly risky to float. A rate hike is priced in but investors will be looking at the dot plot to gain insight on future hikes. If it shows fewer hikes than expected, we could see a nice rally tomorrow, but if it is more aggressive rates could move higher quickly. Not much to gain, but a lot to lose by floating so locking is the way to go here. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 4.0%
- 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.