Mortgage rates unexpectedly fell to new 7-month lows today, following bond market gains in the overnight hours (Asian and European trading sessions). Interest rates are driven by bond markets. The latter is part of an ecosystem of “risk” associated with the entire financial market. At times, most of that broader market will collectively move toward or away from risk. When investors are shedding risk, bonds (and thus, mortgage rates) tend to benefit. Adding to the bigger-picture move was a headline regarding China’s intention to buy more US bonds. Higher demand for bonds results in higher prices (which move inversely from rates).
The average lender is now quoting conventional 30yr fixed rates in the high 3% range on top tier scenarios. The range is fairly wide between lenders as some were better positioned for these market movements than others. That means the same scenario could see a rate as low as 3.75% at one lender and 4.125% at another with the same closing costs.
It continues to be the case that Thursday’s events have the biggest potential to push rates higher or lower. Some of these will be released in the morning hours and will have already had an effect on rates before any lenders publish rate sheets for the day. The bigger potential shock is the unknown outcome of Comey’s congressional testimony. It might not hit markets during business hours, and it might not hit markets at all. But there’s a chance that it could cause a very big movement for better or worse.
Loan Originator Perspective
Bond markets advanced today, breaching key resistance levels as treasury yields hit 2.14%. With limited economic data breaking, it appears James Comey’s Senate testimony Thursday may be the motivation for our rally. Whatever the cause, there’s at least the potential for a significant improvement in rates. Time will tell, the next two days won’t be boring! –Ted Rood, Senior Originator
Bonds continue to rally despite all indicators pointing toward a rate hike next week from the Fed. I am finding most clients are leaning toward locking in the recent gains, especially the ones within 15 days of closing. I feel if you can tolerate the risk, i like floating overnight to see if this rally can extend further. We do have Comey testifying on Thursday and that could get the markets moving. Not sure how much his testimony can benefit bonds at this point. I think if there was a smoking gun, it would be known already. –Victor Burek, Churchill Mortgage
Oh boy. Asian markets pushed us under 2.14 overnight which fills the post election Trump gap (2.138-2.2) formed over Veterans day weekend 2016. As a reminder we gapped from 2.138 to 2.2 between Nov. 10th and 14th. Gaps like that can form strong resistance or floor. Now that we’ve crossed there is a chance it will form a strong ceiling. If so we’re at the worst levels today that we will see for a little while so float float float. Crossing back above the line would obviously be bad news and I’d consider locking immediately if that were to occur. –Jason Anker – Sr. Loan Officer
Today’s Most Prevalent Rates
- 30YR FIXED – 3.875-4.00%
- FHA/VA – 3.5-3.75%
- 15 YEAR FIXED – 3.125-3.25%
- 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.