August 29, 2019
Two days ago, I wrote an article entitled "No, Mortgage Rates Aren't Based on 10yr Treasury Yields." It's worth a read if you're not already up to speed on why that's a true statement. It also paves the way to understand why today's headline can be true (and in fact, it is). Mortgage rates moved LOWER today. Granted, it wasn't a huge move lower, but it's notable against the backdrop of 10yr Treasury yields that were more than 0.06% higher at one point.
Much of the discussion regarding mortgages vs Treasuries centers on MBS (the mortgage-backed securities that serve as the base ingredient for mortgage rates) and the fact that they don't always move in the same direction as Treasuries. But that's only part of today's divergence. We often talk about TIMING being responsible for smaller examples of such discrepancies and it's a factor again today. Simply put, MBS improved yesterday. The gains were eventually enough for lenders to bring rates a bit lower, but not quite enough for lenders to go to the trouble of making a mid-day rate sheet adjustment. In those cases, we cross our fingers and hope the market opens in similar territory the following day (as it did today!) so lenders can pass along the expected improvement.
Loan Originator Perspective
Bond markets digested on target GDP data and a weak treasury auction today, trending downward in afternoon trading. MBS escaped the brunt of the losses, and my pricing was similar to Wednesday's. Tomorrow promises to be a slow day as attentions turn to Dorian and the Labor Day weekend. I'm locking September closings. - Ted Rood, Senior Originator
Today's Most Prevalent Rates
- 30YR FIXED - 3.5 - 3.625%
- FHA/VA - 3.25-3.5%
- 15 YEAR FIXED - 3.125 - 3.375%
- 5 YEAR ARMS - 3.375-3.75% depending on the lender
Ongoing Lock/Float Considerations
- 2019 has been the best year for mortgage rates since 2011. Big, long-lasting improvements such as this one are increasingly susceptible to bounces/corrections.
- Fed policy and the US/China trade war have been key players
- The Fed and the bond market (which dictates rates) will be watching economic data closely, both at home and abroad, as well as trade war updates. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will lead to new long-term lows.
- 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.