When bonds make “gains,” it means that bond prices are moving up. The price of a bond is like the amount that a lender is willing to pay for the right to collect a certain amount of interest. The more the lender is willing to pay, the lower that lender’s “yield” will be. Looked at another way, the lower your interest rate would be in the case of a lender making you a mortgage loan. For that reason, we expect to see mortgage rates fall when bonds are making gains (mortgages are based primarily on bond prices/yields). But in today’s case, rates went a bit higher even though bonds improved.
As is often the case, the discrepancy results from the timing of bond market movement over the past few days. Bonds weakened yesterday and rates logically moved higher. The catch is that bonds continued to weaken after most lenders set mortgage rates for the day. The move was big enough that today’s bond market recovery wasn’t quite enough to get bonds back to the better levels seen yesterday morning, thus leaving a small but logical gap between today’s and yesterday’s mortgage rates.
Loan Originator Perspective
I’m still locking loans closing within 30 days. There’s no discernible trend, so time to play defense. –Ted Rood, Senior Originator
Clients and I continue to favor locking when within 30 days of closing. At this time, i just don’t see much benefit with floating. There is more to risk than to gain. Until “something” happens to send rates one way or another, i will continue to lock. –Victor Burek, Churchill Mortgage
Today’s Most Prevalent Rates
- 30YR FIXED – 4.375%
- FHA/VA – 4.0%
- 15 YEAR FIXED – 4.00%
- 5 YEAR ARMS – 3.875-4.25% 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 to the economy has helped rates fall more quickly than they otherwise might.
- Based on the Fed’s laundry list of concerns, their current outlook for rate hikes and economic growth, and their bond-buying policy shifts, we’ve all but certainly seen the highest rates of this economic cycle in late 2018.
- 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.