August 31, 2017
Mortgage rates moved lower today--something they've been more likely to do in general since early July. The gradual downtrend brought them to their best levels of the year on Tuesday. Yesterday saw a modest bounce and today leaves us somewhere in between. Most borrowers will not see any major differences between Tuesday's quotes and todays, except for slightly higher upfront costs in some cases.
Part of the reason rates have been able to move so much lower in 2017 is that inflation metrics have been tepid, at best. Today's reading of 1.4% on a key inflation report (Core PCE) only reinforced that reality. The Fed would like to see that number closer to 2.0% before taking policy action that puts more substantial upward pressure on rates.
Does that mean rates will continue lower as long as inflation remains muted? Sadly, no. Markets have already accounted for everything that's transpired in terms of inflation reports as well as the expectations for future inflation readings. Even the Fed says it could be a few years before today's 1.4% number moves back to 2.0%. Current rates reflect that outlook, so it would have to deteriorate in order for inflation to push rates lower. Granted, rates could be pushed lower for other reasons, but they could also be pushed higher.
Traditionally, tomorrow's big jobs report is a big source of volatility for rates. That's less certain to be the case tomorrow, given that markets are fairly well availed of labor market strength. Volatility could also come from the fact that it's the first day of a new month, which creates extra trading activity as money managers reshuffle their holdings after having been forced to maintain a certain balance of bonds through the end of the previous month.
Loan Originator Perspective
I continue to see very little benefit in floating. My clients and I are choosing to go ahead and lock in now. Bonds are benefiting from some month end trading today, plus we get the employment report tomorrow. Take advantage of the recent rally and lock in. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 3.875
- FHA/VA - 3.5%
- 15 YEAR FIXED - 3.125%
- 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.