Mortgage rates were roughly unchanged today. Some lenders even offered improved rates in the afternoon as underlying bond markets managed to hold modest gains. All this despite another winning day for stocks (5th in a row now). Much has been made of the interaction between stocks and bonds since last week’s stock market flash crash. Unfortunately many of the correlations mentioned in the news are fairly black and white.
For instance, many people believe that stock prices and bond yields move higher together because a growing economy not only implies stronger stock performance, but it can also support higher rates. In practice, however, this correlation is hit and miss. It seemed to be hitting in the wake of last week’s crash and then again yesterday afternoon. Then today, bond markets (which drive rates) managed to make modest gains even as stocks advanced.
The only point here is to not assume that rates will be at the mercy of stocks–at least not consistently. Rates are at the mercy of much more important and threatening things like supply and demand issues in the bond market, not to mention concerns about rising inflation. These bigger issues aren’t going away quickly. As such, the safest assumption is that the longer-term trend toward higher rates will remain intact indefinitely. There will be days of reprieve along the way. Today was one of them. We haven’t had much luck hoping to see two in a row. Strategize accordingly with respect to locking vs floating.
Loan Originator Perspective
Bond markets posted inconsequential gains today, as mortgage pricing improved ever so slightly. We’re still at the highest rates in 4 years, regardless of what weekly rate surveys (which are outdated before being published) may say. Lock early, or don’t complain if the rate’s higher when you lock later. The trend is (still) not our friend. –Ted Rood, Senior Originator
Today’s Most Prevalent Rates
- 30YR FIXED – 4.625%
- FHA/VA – 4.375%
- 15 YEAR FIXED – 3.875%
- 5 YEAR ARMS – 3.5-3.75% depending on the lender
Ongoing Lock/Float Considerations
- 2017 had proven to be a relatively good year for mortgage rates despite widespread expectations for a stronger push higher after the presidential election in late 2016.
- While rates remain low in absolute terms, they moved higher in a more threatening way heading into the 4th quarter, relative to the stability and improvement seen earlier in 2017
- The default stance for now is that this trend toward higher rates has the potential to continue. It will take more than a few great days here and there for that outlook to change.
- For weeks, this bullet point had warned about recent stability inviting a bigger dose of volatility. That volatility is now here. As such, locking is generally the better choice until the volatility is clearly dying down.
- 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.