July 17, 2017
Mortgage rates are largely dictated by movements in bond markets--specifically mortgage-backed securities (MBS). When bonds improve, prices rise and investors are willing to pay more to buy loans. This results in rates moving lower. In other words, bond market improvement = lower rates.
With all of that in mind, today is a bit of a paradox as the average lender is quoting slightly higher rates today, despite general improvements in bond markets. Nothing too terribly mysterious is at work here though. The inconsistency has more to do with the timing of Friday's market movements and the generally narrow range over the past four days. Specifically, bonds weakened progressively into Friday afternoon and most lenders never fully adjusted rate sheets to account for that weakness. This left the average lender at a disadvantage to begin the new week and today's gains in bond markets weren't enough to offset it.
The most prevalently-quoted conventional 30yr fixed rates remain in a range from 4.0%-4.125% on top tier scenarios. Most clients will not see any change in the "rate" side of the equation compared to Friday, thus implying moderately higher upfront costs.
Loan Originator Perspectives
Bond markets slumbered today, posting small gains in early PM trading. There's scant data on tap for this week, but Thursday has the potential for drama as both the ECB and BOJ will make policy announcements. Looks like minimal risks floating here, with the potential for minimal gains (at least until Thursday). In "flip a coin" situations like this, I typically lean towards locking, and now is no exception. -Ted Rood, Senior Originator
Bonds continue to run up against resistance around 2.32 on the benchmark 10 year note. Until we see a break of this level, i think it is wise to consider locking, especially if you are within 15 days of closing. With the ECB and Japan central banks meeting later this week, it is unlikely we see a decisive move in either direction until after both on Thursday. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 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
- 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.