September 12, 2017
Mortgage rates continued higher at a reasonably abrupt pace today as last week's themes have been completely reversed. What themes are those? Generally speaking, markets were undergoing a risk-aversion trade given the rising geopolitical tension surrounding North Korea and the economic uncertainty associated with back-to-back hurricanes.
Risk aversion tends to take the form of investors seeking safer haven assets like bonds at the expense of higher growth potential assets like stocks. Indeed, stocks had stumbled sideways to slightly lower last week while bond prices rose (higher bond prices = lower rates). Now that dynamic is reversing with stocks breaking to new all-time highs while bond prices move lower (lower bond prices = higher rates).
In the bigger picture, the damage is still far from severe. The best 30yr fixed scenarios are still under 4% for many lenders. But the past 2 days have constituted the most abrupt move higher in rates since at least late June, 2017. In this environment, it makes more sense to remain defensive in terms of locking and floating--at least until we find the next solid ceiling for rates.
Loan Originator Perspective
Bond markets' regression continued today, on the heels of Monday's stock rally and potential tax reform progress. Bonds' losses weren't overly pronounced, but it feels like we're teetering towards further regression. My loans closing within 30 days are locked, don't see a large short term potential for gains here. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 3.875-4.0%
- FHA/VA - 3.5%
- 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.