January 25, 2018
Mortgage rates improved modestly today, bringing them back in line with Wednesday afternoon's best levels. After underlying bond markets overcame volatility associated with a monetary policy announcement from the European Central Bank, they were further helped by a strong 7yr Treasury auction in the afternoon. While US Treasuries don't directly dictate mortgage rates, there's a good amount of correlation between the two. Strong demand for longer-term Treasuries bespeaks similarly strong demand for the bonds that underlie mortgages.
The problem we're facing is that while rates have been able to improve on individual days here and there over the past few weeks, they haven't been able to string together 2 solid days. At minimum, we'd need to see that before getting our hopes up about the longer-term trend toward higher rates potentially hitting snags. While that could happen at any time, all we can know at the moment is that the existing trend has been negative and that it makes sense to assume it will remain so until we have clear evidence to the contrary. Today was "nice," but unless it brought friends, it wasn't sufficient evidence.
On a side note, we talked about Freddie Mac's rate survey lagging behind the actual market when things are volatile (i.e. last week's survey underreported the true rise in rates, leading to confusion among some mortgage shoppers after reading articles that cite Freddie's numbers in a way that makes them seem timely). This week's survey went a long way toward getting them caught up. It was the sharpest weekly jump since late 2016, taking their reported rate back into April 2017 territory.
Loan Originator Perspectives
Bonds bounced back today after a strong 7 year treasury auction. Many lenders (including my employer) repriced better by early afternoon, although "better" has to be taken in context. Rates are the highest in over 3 years and the upward rate trend is still definitively intact. Today's a respite, not a reversal. I'm still locking early. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.25-4.375%%
- FHA/VA - 4.0-4.25%%
- 15 YEAR FIXED - 3.625%
- 5 YEAR ARMS - 3.0-3.5% depending on the lender
Ongoing Lock/Float Considerations
- 2017 had proven to be a relatively good year for mortgage rates despite widespread expectations for a stronger push higher after the presidential election in late 2016.
- While rates remain low in absolute terms, they moved higher in a more threatening way heading into the 4th quarter, relative to the stability and improvement seen earlier in 2017
- The default stance for now is that this trend toward higher rates has the potential to continue. It will take more than a few great days here and there for that outlook to change.
- For weeks, this bullet point had warned about recent stability inviting a bigger dose of volatility. That volatility is now here. As such, locking is generally the better choice until the volatility is clearly dying down.
- 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.