September 5, 2017
Mortgage rates moved lower today on a combination of factors. Chief among these were headlines over the weekend concerning more North Korean weapons testing--specifically, a detonation of its largest bomb ever on Sunday followed by reports from South Korea of another ballistic missile test by the end of the week. The threat of global nuclear conflict pushes rates lower because the bond markets that underlie rates can benefit from fear and panic. Investors seeking safe havens often move money into bonds, where higher demand equates to lower rates.
US Treasuries are more readily able to benefit from this sort of "flight-to-safety" trading than mortgage-backed-securities (or "MBS"), which have the most direct influence on mortgage rates. Indeed most mortgages are being quoted at the same rates seen on Friday with the only improvement being seen in the form of modestly lower upfront costs. Even after adjusting "effective rates" based on those upfront costs, today's gains in mortgages come out to about 0.02-0.03% whereas 10yr Treasury yields were down 0.09%.
Loan Originator Perspective
Bonds gained today amid more North Korean drama and Hurricane Irma uncertainty. While my rate sheets improved, they didn't reflect the full measure of MBS' improvement, that may come tomorrow. While locking at these levels is tempting, think tomorrow's pricing will be better. I'll float most new loans, for the short term. -Ted Rood, Senior Originator
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.