Mortgage rates resumed their recent trend higher today. Yesterday had been the first day since June 27th without noticeable weakness–raising some hope that the negative trend might be running out of steam. Although today’s jump isn’t as big as some recent examples, it nonetheless brings the average lender to the worst levels since May 11, 2017. The most prevalent conventional 30yr fixed quote is still 4.125% on top tier scenarios, but today’s closing costs would be slightly higher than yesterday’s.
So what’s up with all the recent drama?! In a word: Europe. As we’ve witnessed time and again over the past 6-7 years, the bond markets (which dictate rates) of the world’s major economies are unavoidably interconnected. The correlations are far from absolute, but when one major bond market is experiencing big moves, it frequently spills over into other bond markets. At the moment, investors are concerned that the European Central Bank is heading for its own version of the taper tantrum seen in the US in 2013. Rates have risen much faster in Europe, but US Treasuries have been pulled higher as well, bringing Mortgage-Backed-Securities (the bonds that directly affect mortgage rates) along for the ride.
Loan Originator Perspective
Very risky to be floating this market. The trend is not our friend, and will continue to not be our friend til it isnt. Plus, we have payrolls report tomorrow which always has the potential to move rates. Only those that can afford to be wrong should consider floating right now. –Victor Burek, Churchill Mortgage
Bond markets gave back yesterday’s gains and more today, as ECB minutes revealed their intentions to reduce their balance sheets (aka: ‘taper”). Central bank bond purchases boost prices, lowering rates to achieve economic growth, and removing that stimulus raises rates. We’re still in a “trend is not our friend” situation here, and anyone floating needs to be keenly aware of that. My pipeline is locked, and will remain that way until further notice. –Ted Rood, Senior Originator
Today’s Most Prevalent Rates
- 30YR FIXED – 4.125%
- FHA/VA – 3.75%
- 15 YEAR FIXED – 3.375%
- 5 YEAR ARMS – 2.75 – 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Investors were relatively convinced that the decades-long trend toward lower rates had been permanently reversed after Trump became president, but such a conclusion would require YEARS to truly confirm
- Instead of continuing higher in 2017, rates instead formed a narrow, sideways range, and held inside until April. Investor perceptions are shifting such that fiscal reforms and other policy developments will need to live up to expectations in order to push rates higher. Geopolitical risks would also need to avoid flaring up (more than they already have)
- For the first time since the election, we’re in a rate environment where you wouldn’t be crazy not to lock at every little opportunity/improvement. Until/unless it’s broken, the highest rates of early-2017 mark the ceiling, and we’re now waiting to see how much lower we can go from here.
- 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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