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Mortgage rates were steady-to-slightly lower today, keeping them in line with the lowest levels in 2 weeks and very close to the lowest levels of the month. For most lenders, that means conventional 30yr fixed rate quotes of 4.25% on top tier scenarios. Some lenders are still up at 4.375% and an aggressive few are back down to 4.125%.
Last week, we discussed the motivations for the rate improvements in detail. To recap: longer-term rates like mortgages had already risen in anticipation of the Fed rate hike. It wasn’t a surprise. Instead, markets were focused on the Fed’s forward-looking rate hike forecasts, which came out slightly slower than markets expected. Thus, rates were overly-prepared for a fast rate hike timeline and had some room to return to early March levels.
From there, attention has turned to fiscal uncertainty as several policy objectives of the Trump administration have run into roadblocks. Specifically, investors are concerned that tax cuts will be significantly delayed as the health care debate seems to be front and center. The expectation of tax cuts (and other fiscal measures) was a major contributor to the move higher in rates and stocks after the election. To whatever extent those measures are delayed, investors can easily question if rates and stocks are higher than they should be.
Loan Originator Perspectives
Bonds continue to move lower following the FOMC announcement of last week. At this point, if you have been floating I think it is worthwhile to continue to float to see how much further bonds may rally. Lenders have been pretty tight in passing along these recent gains making floating a little less risky. –Victor Burek, Churchill Mortgage
Bonds may have found their footing, as we retained (and built on) last week’s gains Monday. My pricing was roughly 20 bps better than Friday’s. There’s scant data for a few days, and the potential for some Brexit Drama as Britain prepares for the next step in leaving the EU. While I don’t anticipate a face melting rally, think we should hold our ground or post small gains the next few days. I’m not adverse to floating new loans short term, provided borrowers understand there’s still a chance pricing could worsen. –Ted Rood, Senior Originator
Today’s Best-Execution Rates
- 30YR FIXED – 4.25%
- FHA/VA – 4.0-4.25%
- 15 YEAR FIXED – 3.5-3.625%
- 5 YEAR ARMS – 2.75 – 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Some investors are increasingly worried/convinced that the decades-long trend toward lower rates has been permanently reversed, but such a conclusion would require YEARS to truly confirm
- Still, it would take something very big and unexpected for rates to make a big, sustained push back toward pre-election levels. Even then, it would take time to confirm such a shift.
- With fiscal and monetary policy paths both clearly putting pressure on rates, at least one of those would need to make a noticeable change before anything but a cautious, lock-biased approach makes sense as a baseline strategy. Floating should only be considered as a tactical opportunity to capitalize on temporary corrections.
- 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.
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