February 13, 2018
Mortgage rates began the day fairly well in line with the past 2 days. While it's nice to see some stability in this environment, it's not so nice that it's occurring at 4-year highs. Do we have a shot at moving much lower or should you brace for more? What warning signs should you look for to help answer that question?
Much has been made in the news recently about the correlation between stocks and bonds (which dictate rates). Depending on the day, stocks are said to be falling because rates are too high or rates are said to be rising because stocks are rising. In reality, rates are largely doing their own thing, and that thing just happens to correlate with movement in stocks in general. Last week's stock crash was a different story as it did actually help interest rates catch their collective breath.
Tomorrow will be a different story yet again as the Consumer Price Index (CPI) stands a very good chance to inform the next major move for rates. CPI is the most important inflation report and arguably the most important economic report in general at the moment. To whatever extent inflation is higher than expected, we're likely to see upward pressure on rates. If it's much weaker than expected, the recent resilience near the multi-year rate highs could give way to some actual progress back in the other direction. It remains to be seen how long such progress could last, but in any event, you'd want to assume it had a limited shelf life unless something changes (and if something changes, we'll definitely be talking about it here).
Loan Originator Perspective
Bonds tread water most of the day, posting marginal gains. While the gains beat losing ground, they're still nowhere near sufficient to regain much of the ground we're lost this year. I'm still locking early, for all but "super aggressive" borrowers. -Ted Rood, Senior Originator
Pretty boring advice regarding lock or float. Until this trend changes, locking at application is the wise move. Any time bonds try to rally, it is met with selling. The trend is not our friend. -Victor Burek, Churchill Mortgage
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.