October 16, 2018
Mortgage rates didn't move much today. Some lenders were perfectly unchanged, but the average lender was just slightly higher. That's at odds with underlying bond market movement (which directly impacts rates)--at least at first glance. Specifically, the bonds underlying mortgages were slightly stronger today. That would imply slightly lower mortgage rates. So why did rates rise?
As is often the case, today's seemingly paradoxical movement is due to timing. Bonds were weakening ever-so-slightly yesterday--something that's consistent with lenders raising rates. But the bond market didn't weaken enough for lenders to make those changes in the middle of the business day. Additionally, today's bond market improvement didn't really stick until the afternoon. Like yesterday, it wasn't quite enough to compel lenders to make mid-day rate changes.
All of the above is splitting hairs. In the bigger picture, rates have been flat since last Thursday, and are generally holding just slightly under their highest levels since early 2011. The next potential flashpoint is tomorrow's release of the Minutes from the most recent Fed meeting. These don't offer any new policy updates, but they do give investors a chance to examine the Fed's conversation leading up to the rate hike 3 weeks ago. Occasionally, there are clues about future policy decisions in the Minutes. In those cases, there can be a volatile reaction in rates.
Loan Originator Perspective
Bond markets improved ever so slightly today, for no particular reason. There's scant data to inform traders the rest of the week, so it's unlikely we'll see substantial movement. While floating short term might not involve huge risk, the rewards are likely small. I'm still locking early. -Ted Rood, Senior Originator
My clients and i remain defensive in this market. If within 30 days of funding, i do not see much benefit in taking the risk to float. If you can float overnight and lock on a shorter term tomorrow, then that risk may be worth it. -Victor Burek
Today's Most Prevalent Rates
- 30YR FIXED - 5.0%
- FHA/VA - 4.5-4.75%
- 15 YEAR FIXED - 4.5%
- 5 YEAR ARMS - 4.25%-4.75% depending on the lender
Ongoing Lock/Float Considerations
- Rates continue coping with several big-picture headwinds, including: the Fed's rate hike outlook (and general policy tightening), the increased amount of Treasury issuance to pay for the tax bill (higher bond issuance = higher rates), and the possibility that fiscal stimulus results in higher growth/inflation (which certainly seems to be the case so far in 2018).
- While rates were able to recover and stay sideways in the summer months, September and October have seen a surge up to the highest levels in more than 7 years.
- Upward pressure can continue as long as economic growth and inflation continue running near long-term highs. Stay defensive (i.e. generally more lock-biased). It will take a big change in economic fundamentals or geopolitical risk for the big picture to change. Such things tend to not happen as quickly as we'd like.
- 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.