June 7, 2017
Mortgage rates managed to hold in line with 2017's lowest levels for a 2nd day, even though underlying bond markets suggested a move higher. That means the prices of mortgage-backed-securities (MBS--the bonds that dictate mortgage rates) were lower. When MBS prices are lower, it means investors are paying lenders less to buy mortgages. Lenders then raise rates to entice investor demand.
If the nuts and bolts underlying the mortgage rate market suggested a move higher, why were rates able to hold their ground? The first part of this answer is that we're not talking about huge amounts of movement in bond markets. US Treasuries did experience a fair amount of weakness, but MBS held their ground better by comparison.
Beyond that, lenders were holding something back yesterday, which is entirely common when bond markets make a big move to the best levels of the year with high-risk events less than 48 hours away. Not only do lenders want to be sure the gains are maintained, but they're also generally more cautious about making big adjustments ahead of high-risk events.
The events in question will start hitting first thing in the morning, so if you're reading this on Wednesday afternoon and still have the ability to lock, you would be doing so at the lowest rates in nearly 8 months. Tomorrow's high-risk events certainly could push rates even lower, but there's an equal chance that rates will be heading higher. In either case, the moves are likely to be bigger than average over the next 2 days.
Loan Originator Perspective
Bond markets and investors both warily waited today for James Comey's Thursday testimony. My rate sheets were virtually identical with Tuesday's. At this point, I think bond buyers have "bought the rumor", the question now is whether they'll "sell the news" when Comey actually appears. It would take monumental shocks to further spook markets (improve rates), but that doesn't mean they aren't on tap. I see more downside than upside to floating here, think we're ripe for a pullback to higher rates if the smoke from Comey's appearance doesn't lead to a fire. -Ted Rood, Senior Originator
Busy day tomorrow with potential tape bombs that can come at any time. With this huge unknown, my clients are favoring locking in today at current pricing. We have had some nice gains recently, so i think if you are within 30 days of closing, you should strongly consider locking in today. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 3.875-4.00%
- FHA/VA - 3.5-3.75%
- 15 YEAR FIXED - 3.125-3.25%
- 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.