Mortgage rates fell to new lows for the year today, following the North Korea nuclear threat headlines.  In truth, the preceding sentence gives too much credit to geopolitical risk.  Rates were already drifting very close to the lowest levels since the election, even before yesterday’s news broke.  Additionally, the improvements are still too small to be translating to NOTE rates themselves (the actual interest rate applied to your loan balance).  Instead, it’s the upfront costs that are allowing for fine-tuning adjustments.  (This means the EFFECTIVE rate is changing, but not the NOTE rate.)

The bonds that underlie mortgage rates tend to stick pretty close to US Treasuries.  That wasn’t the case in the run up to (and away from) the financial crisis, but the relationship has been well-established for years now.  As such, we can look to the far more robust and active Treasury market or clues about rate momentum.  There we see 10yr Treasury yields (the most quintessential benchmark for longer-term rates) having a hard time breaking below the recent floor around 2.21%.  

Until that happens, it makes sense to remain cautious when it comes to floating vs locking in the mortgage world.  Yes, mortgage rates hit new 2017 lows because they’ve outperformed Treasuries since early June.  If Treasuries see a big bounce, so will we.

Loan Originator Perspective

Not even potential conflict with North Korea can make bonds break are current floor around 2.22 on the benchmark 10 year note.  Bonds are holding near this floor, so like yesterday i and my clients favor locking.   Until this floor breaks, i will continue to be defensive and lock.  –Victor Burek, Churchill Mortgage

Bonds posted small gains today, as North Korean saber-rattling prompted buyers.  We’re still firmly stalled in the recent 2.22-2.28% on treasury yields.  It’s important to remember that these incremental price changes rarely impact actual rates; they more often alter borrowers’ lender credits/discount points.  We get pertinent inflation data on Friday, be ready for potential rate changes then.  Borrowers within 30 days of closing with limited risk tolerance should be locked here. –Ted Rood, Senior Originator 

Today’s Most Prevalent Rates

  • 30YR FIXED – 4.00%
  • 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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