Mortgage rates moved modestly higher today, for most lenders. This had more to do with yesterday’s market movement than today’s. Bond markets were weakening yesterday afternoon (which typically results in rates moving higher). But the weakness came too late in the day for most lenders to bother with reissuing rate sheets. Instead, they waited for this morning. With a bit of weakness remaining intact, it was an easy call to raise loan costs.
Even so, the day to day movement in rate quotes continues to be quite small. The average scenario won’t be detectably different if quoted today vs yesterday. Interest rates themselves will certainly be unchanged. It’s only via modest changes in upfront closing costs that lenders can modulate “loan costs” (or the “effective rate”) in these situations.
What will it take to change this low volatility pattern and how soon might it happen? With a potent combination of economic data tomorrow morning and the Fed Announcement in the afternoon, that’s a timely question! While a rate hike from the Fed is a foregone conclusion, markets can still react forcefully to any changes in the Fed’s rate hike outlook. That makes tomorrow afternoon the most obvious staging area for potential volatility in rates in the short-term.
Higher potential volatility brings bigger risks and bigger rewards for those playing the lock/float game. With rates still close to long-term lows, risk-averse clients are well within their rights to err on the side of locking. On the other hand, 10yr yields (a good proxy for broader rate momentum) have done a good job of holding under 2.22% for the past 3 days, despite trying to break higher on several occasions. Floaters are hoping this is a ceiling that continues to hold through tomorrow’s Fed events. Whatever you decide, make sure you have a strategy in place with your loan originator.
Loan Originator Perspective
Tomorrow will be a busy day and rates look to make a move one way or the other. With where rates are today, i think you do have more to risk than to gain by floating, so i think locking is the smarter choice I do think the FOMC statement and accompanying dot chart will be favorable to lower rate but only float if you can afford to be wrong. –Victor Burek, Churchill Mortgage
I’m inclined to float as long as we stay under 2.22 – 2.25. We’ve tested and held 2.22 each of the last three days. Technical levels aside, there is lots of news on tap tomorrow including FOMC rate decision. Beware! –Jason Anker – Sr. Loan Officer
Bonds and lock desks idled in place again, as both prepared for tomorrow’s FOMC policy statement and Chairwoman Yellen press conference. It’s a foregone conclusion the Fed will raise its overnight rate, the bigger question is whether it will alter the outlook for future bond purchase tapering. The last few statements have been profoundly neutral, it would be a shock if there were any big surprises tomorrow. Don’t see a great likelihood of major moves either way for rates, but locking is always the safe route on days like these. –Ted Rood, Senior Originator
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.