July 25, 2017
Mortgage rates moved abruptly higher today, erasing the improvement seen last week. An entire week's worth of movement may or may not be worth stressing out about depending on your perspective. On one hand, we're only talking about a change of roughly 0.06% in terms of the "effective rate" on the average 30yr fixed loan. That'll cost you about $7/month on a $200k loan.
On the other hand, last week was the best in more than 2 months. While erasing those gains might not be dramatic in terms of outright financial impact, it could signal a shift in the overall trend.
There are 2 trends to consider at the moment. The first only stretches back to early July, and that's the one that's clearly under attack. The other trend is one of general improvement since March 2017, and we'd need to see several days like today before questioning that one.
In general, we were already a little concerned that rates seemed hesitant to break below last week's floors. Those floors are moving targets in terms of mortgage rates, depending on the lender, but they correspond with 2.22% in terms of 10yr Treasury yields.
Tomorrow's potential volatility is centered on the afternoon hours with a Treasury auction at 1pm and the Fed Announcement at 2pm Eastern time.
Loan Originator Perspectives
Bond markets crossed up usual logic and sold off today prior to tomorrow's Fed announcement. Pricing worsened by around 25 bps initially, and multiple lenders revised their rates upward as the day progressed. It wasn't a huge move higher, but certainly one that impacted borrowers' cost/credit to get their chosen rate. Moves like this make me wonder if bond traders have a whiff of tomorrow's Fed statement. My pipeline is locked. I'd rather lock and potentially lose a few basis points than float and risk a bunch! -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.00%
- 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.