August 6, 2019
Mortgage rates hit their lowest levels since November 2016 late last week and they've proceeded to set a new long-term low each day since then. Today was no exception. That's fairly surprising at first glance, considering the underlying changes in the mortgage-backed securities (MBS) that most directly affect mortgage rates.
Typically, when I bring up MBS prices, it's to highlight a discrepancy between the movement in Treasury yields and mortgage rates. Many relatively savvy market-watchers and consumers mistakenly believe US Treasuries dictate mortgage rate movement when in fact, that' the job of MBS. It just so happens that MBS and Treasuries tend to move in lock-step. When they don't, we can see mortgage rates diverge from Treasury yields by small amounts.
Today, however, MBS indicated higher rates while Treasuries ended up flat. The explanation has to do with the 2nd of the two main caveats I like to bring up amid "rate vs market" discrepancies: timing. Mortgage lenders need to see big market moves sustained in order to adjust rate sheets to match. There was plenty of room left to catch up to yesterday's moves that today's weakness was scarcely enough to offset it. As for the weakness itself, that's another story for another day--one that has to do with how investors tend to shun MBS when rates drop as quickly as they have been. Thankfully, that trend only tends to last as long as markets are making unexpectedly big leaps from day to day. As soon as things calm down, MBS (and then mortgage rates) can close the gap).
Loan Originator Perspective
Bonds regressed today, hardly a surprise after our remarkable three day rally. With pricing still at/near the best levels since Nov 2016, it's certainly an appealing time to start, and lock loans. We'll need more Trump Tariff Trauma to proceed lower from here, and just may get it, but folks within 30 days of closing should look long and hard at locking in these rates. -Ted Rood, Senior Originator
Starting to see some improvements in rate sheets but they still appear to be quite conservative. I think floating overnight is the way to go right now and evaluate pricing in the morning. With the big move in yields, lenders tend to be slow to pass along all the gains. They want to make sure the rally holds and also prevent blown locks. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 3.5% - 3.75% (wider range than normal due to volatility)
- FHA/VA - 3.25%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.375-3.75% depending on the lender
Ongoing Lock/Float Considerations
- Early 2019 saw a rapid reevaluation of big-picture trends in rates and in markets in general
- The Federal Reserve has been a key player, and while they aren't the ones pulling the global economic strings, their response (and even their EXPECTED response) to the economy has helped rates fall more quickly than they otherwise might.
- Based on the Fed's laundry list of concerns, the bond market (which determines rates) will be watching economic data closely, both at home and abroad, as well as trade-related concerns. 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.