April 20, 2017
Mortgage rates moved higher today as global financial markets shifted ahead of this weekend's election in France. One of the candidates--Le Pen--is a populist whose victory is seen as potentially destabilizing the entire EU. Whether or not that's actually the case remains to be seen, but for now, stocks and rates have generally moved higher as polls show Le Pen falling behind (instability and uncertainty push rates and stocks lower).
French politics are far from the only thing guiding the movement in interest rates. If anything, there are too many potential sources of inspiration competing for attention. These include geopolitical risks, fiscal policy uncertainty, currency fluctuations, a possible shift in the tone of economic data, tax reform hopes/headlines, and quite simply the preexisting momentum in the marketplace.
Preexisting momentum might sound a bit esoteric, but it's really fairly simple. It refers to the fact that rates have been moving lower in a linear and predictable way for a certain amount of time. In the current case, the positive trend has been intact since mid-March. Despite two days of bond market weakness, the trend remains intact this afternoon. If rates continue rising for a few more days, the trend will soon be in jeopardy, and that will act as a more serious cue for more risk-tolerant borrowers to lock their rates. Risk-averse borrowers already had that cue from yesterday's bond market weakness.
The average lender continues quoting conventional 30yr fixed rates of 4.0% on top tier scenarios, but today's upfront costs would be slightly higher than yesterday's.
Today's Best-Execution Rates
- 30YR FIXED - 4.0%
- FHA/VA - 3.5 - 3.75%
- 15 YEAR FIXED - 3.25%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Investors were relatively convinced that the decades-long trend toward lower rates had been permanently reversed after Trump became president, but such a conclusion would require YEARS to truly confirm
- Instead of continuing higher in 2017, rates instead formed a narrow, sideways range, and held inside until April. Investor perceptions are shifting such that fiscal reforms and other policy developments will need to live up to expectations in order to push rates higher. Geopolitical risks would also need to avoid flaring up (more than they already have)
- For the first time since the election, we're in a rate environment where you wouldn't be crazy not to lock at every little opportunity/improvement. Until/unless it's broken, the highest rates of early-2017 mark the ceiling, and we're now waiting to see how much lower we can go from here.
- 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.