November 2, 2018
Mortgage rates had a bad week and an especially bad day following a much stronger-than-expected jobs report. The Employment Situation (the most important piece of labor market data and arguably the most important economic report as far as interest rates are concerned) showed the highest pace of wage growth since before the recession and a surprisingly robust addition of new jobs in October. Strong jobs data is the nemesis of low interest rates and today was no exception.
Mortgage rates were already operating fairly close to long-term highs, but today's move easily took them to new highs. The average lender is now quoting conventional 30yr fixed rates of 5% for relatively ideal scenarios. Those without a big down payment or without perfect credit/income can expect to see even higher rates. Most lenders ended up recalling the morning's initial rate sheets and reissuing higher rates at least once today.
There's really no silver lining apart from the fact that the higher rates go, and the quicker they get there, the closer we get to the point that the economy slows down as a result. When that happens, rates will begin to fall before just about anything else. Unfortunately, the expected time frame for such things is incredibly wide (not the sort of thing you hope for if you need to buy/refi). And yes... it's also unfortunate that our one source of solace at the moment involves an economic downturn, but if you want low interest rates, that tends to come with the territory.
Loan Originator Perspective
October's NFP jobs report beat market expectations today, and bonds sold off as a result. Treasury yields are near early October's multi-year high, and MBS are following their lead. There's little/no motivation for rates to drop, and plenty for them to rise. Lock early, ideally as soon as you have the opportunity. -Ted Rood, Senior Originator
Vast majority of clients continue to favor locking in once within 30 days of funding. I do not believe floaters have enough to gain to justify the risk as higher rates continue to be the trend. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 4.875-5.0%
- FHA/VA - 4.5%
- 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.