August 23, 2017
Mortgage rates reversed yesterday's move today, falling back in line with recent lows--also the lowest levels since November 2016. At this time of year, the bond markets that underlie mortgage rates tend to move more serendipitously. That worked in our favor today, but it's not indicative of new resolve or meaningful underlying motivations. In other words, it's just the way the ball bounced.
That "random walk" COULD pause over the next 2 days, to some extent. The Kansas City district of the Fed is hosting its annual Jackson Hole symposium and there will be several big-ticket speakers including Fed Chair Janet Yellen. While markets have a pretty good sense of where Yellen and the Fed stand, they're a bit more interested in the European Central Bank (ECB). ECB President Mario Draghi will also be speaking at the symposium. While he's not necessarily expected to drop any major hints about European monetary policy, it's possible that markets will pick up on some subtle hints and run with it.
Why do we care about Europe? We don't always, but at the moment, the ECB is getting close to needing to make a decision about its bond buying program set to expire in December. Bond-buying, when done on the scale seen in the US, Europe, and Japan has a massive impact on interest rates. European bond buying affects Europe the most, but its effects clearly spill over to non-European markets as well.
3.875% remains the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios, although quite a few lenders remain at 4.00%. Today's upfront costs for 3.875% would be slightly higher than yesterday's.
Loan Originator Perspective
Bonds posted small gains today, on the eve of the Fed's Jackson Hole Conference tomorrow. Fed rhetoric has been fairly transparent and predictable lately, so it seems unlikely any breaking news will come out of the meeting. We're back near the bottom of the recent rate range, the question is whether rates get enough motivation to continue downward. I need to see more than a day's gains to pronounce this a trend. If you're floating, keep an eye on the lock trigger. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 3.875-4.00%
- 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.