July 19, 2017
Mortgage rates moved lower today, despite slightly weaker underlying bond markets. This has been an ongoing phenomenon in recent days. Bonds improve, implying lower mortgage rates, but lenders wait to drop rates until bond market improvement is vetted. In the current case, yesterday's market gains remained relatively intact despite today's market losses, thus giving lenders the green light to pass the gains through to mortgage rate sheets.
Although today's rates aren't appreciably lower than yesterday's, they're technically the best we've seen since June 28th. More lenders are quoting top tier conventional 30yr fixed rates of 4.0% instead of 4.125%, and some of the aggressive lenders are back down to 3.875%.
If there's been an underlying reason for the hesitation on the part of lenders, the elephant in the room is tomorrow morning's announcement from the European Central Bank (ECB). Granted, domestic events and monetary policy have a more direct effect on rates in the US, but global bond markets are interconnected. Any major shock in the EU will be felt in US bond markets, and consequently, mortgage rates. Some investors are concerned the ECB will allude to plans to taper its bond purchases. While no official plans are likely to be announced tomorrow, the "clues" offered by ECB President Mario Draghi could cause volatility in rates, for better or worse.
Loan Originator Perspectives
Before rate sheets hit in the morning, we will get a rate announcement from the ECB. If in the release or following press conference, tapering is mentioned in a meaningful way, rates could take a turn for the worse very quickly. I personally don't think we will get anything, but it is risky to float. The risk of floating outweighs the benefits. So i like locking here. -Victor Burek, Churchill Mortgage
Bond markets were flat today following Tuesday's surprise rally. My pricing did improve slightly, which is not unusual since secondary desks often view one day rallies with suspicion. Tomorrow brings both ECB and Bank of Japan policy announcements, which could well determine where rates go from here. It's tempting to lock here, especially for those within 30 days of closing. Folks with more time (and risk tolerance) might consider floating IF they won't lose sleep over it. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.00-4.125%
- 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.