October 23, 2018
Mortgage rates didn't move much for the second day this week. Unlike yesterday, there was a relatively massive amount of volatility in underlying financial markets. This was especially true for stocks and the US Treasury market (which sets the tone for the broader bond market where mortgages operate). Even if we look specifically at mortgage-backed securities (MBS), we see some of the best gains this month.
In fact, mortgage rates likely would have ended the day with more noticeable improvement if the gains had remained intact. Unfortunately, the strength began to erode in the late morning hours. Bonds had benefited from massive stock losses, but starting just after 10am, stocks began to bounce back while bonds weakened (weaker bonds = higher rates). Momentum kicked into higher gear later in the day and several lenders who had offered decent improvements this morning were forced to recall rates sheets and reissue new, higher rates.
The net effect is that the average lender is now showing only modestly lower rates compared to yesterday's latest offerings. Like yesterday the change is only measurable in terms of upfront costs. Actual NOTE rates are unchanged (lower upfront costs imply lower "effective rates").
Loan Originator Perspective
Bonds bounced higher as stocks slumped today, but treasury yields failed to breach 3.13%, an important resistance level. This feels more like a "sympathy rally" due to stocks' sell-off than it does an actual bond rally. We're still mired within recent ranges, just closer to the low end than high. Looks like a locking opportunity for anyone floating and within 45 days of closing. -Ted Rood, Senior Originator
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.