November 5, 2018
Mortgage rates continued pushing up to new 7-year highs today, even if only by a small margin. This is notable because the underlying bond market (the primary factor in mortgage rate movement) suggested that rates should have fallen today. The issue is that bond markets were so weak on Friday that mortgage lenders didn't have a chance to fully adjust their rate sheets to reflect the losses. As such, there were still some losses to deal with this morning, and today's modest bond market improvement wasn't quite enough to offset them. In other words, we began the day with enough of a disadvantage from Friday that it couldn't be overcome.
As for today's overall bond market atmosphere, things were far calmer today, with trading levels essentially sideways for the duration. There is some potential for volatility as the week progresses. Bonds/rates are on a fence at these long-term highs. They're either going to attempt to push lower more meaningfully than they did in October, or we're about to see another push to new long-term highs. From a lock/float standpoint, it hasn't made much sense to consider floating recently. That will continue to be the case until we're clearly witnessing a more substantial bounce. Rest assured, I'll be talking about it in detail when it happens.
Loan Originator Perspective
Bond markets posted minimal gains today, and my rates mirrored Friday's. Tomorrow brings a Treasury bond auction, and Thursday the Federal Reserve will issue a new policy statement, but is unlikely to change its overnight rate. I don't see any rallies looming, so will continue to lock applications closing within 30 days sooner rather than later. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 5.0%
- FHA/VA - 4.5%-4.75%
- 15 YEAR FIXED - 4.5%-4.625%
- 5 YEAR ARMS - 4.375%-4.875% 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.