February 12, 2018
Mortgage rates were generally in line with Friday's latest levels today. Unfortunately, those happened to be the highest in more than 4 years.
Rates are primarily determined by the prices and yields of bonds. The bond market has increasingly been under pressure over the past four months for a few key reasons. One of those reasons has to do with simple supply and demand. The government issues bonds to supplement revenue or to pay for new spending (i.e. 2018's expected drop in tax revenue created the need to issue more debt). More issuance (i.e. more "supply") creates lower bond prices and higher rates (prices and rates move inversely).
Although bond markets received another warning shot with respect to increased supply today due to the unveiling of Trumps's new budget, market participants didn't do much with that information. Bonds were mostly unchanged as they wait for bigger, more important news like Wednesday morning's Consumer Price Index (inflation data).
There's not much--if any--sense in floating your rate and hoping for a bounce in this environment. That said, the higher rates go, the more odds increase that we'll see things bounce back. It remains to be seen how big such a bounce will be and how long it will last.
Loan Originator Perspective
The new week started with, predictably, more bond market losses. Treasury yields MAY be finding some support, but still remain near their 5 year highs. The trend hasn't changed, and until it does, "lock early" is still my mantra. -Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.75%
- 5 YEAR ARMS - 3.375-3.75% 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.