Mortgage Rates Resisting a Move Lower

By: Matthew Graham •

Mortgage rates were almost perfectly unchanged again today, meaning they haven't really changed in more than a week.  All this despite a rather noticeable improvement in underlying bond markets (something that typically goes hand in hand with lower mortgage rates).  Granted, the bonds that underlie mortgage rates didn't do quite as well as US Treasuries, but even then, mortgage rates barely budged. 

Is this some sort of evil conspiracy?  

Probably not...  It probably has more to do with a phenomenon we discuss fairly frequently whereby the improvements in bonds over the course of the day aren't quite enough to get lenders to change their rates in the middle of the day.  The result is that lenders are more likely to offer those improvements tomorrow morning assuming, of course, that bond markets don't make any big moves in the overnight trading hours.  That's not always safe to bank on, but it does give us a slight advantage heading into tomorrow.

 See Rates from Lenders in Your Area


Loan Originator Perspective

Both MBS and treasuries touched their best levels in a month today, despite a lack of significant data or apparent economic/geopolitical motivation.  With scant data due this week to inform rates, I'm hopeful we can retain these gains.  I'm not ready to sail the float boat yet, but will probably watch this market for a day or two before locking new loans.    -Ted Rood, Senior Originator

Bonds are having a very nice day today based really on nothing.  No economic data has come out and no tape bombs from around the world.  Rate sheets i have seen do not really show any improvement.  With the 10 year note under 2.85, i feel it  may be worth the risk to float overnight.  This will give lenders some time to see if these yields can hold and give them time to pass along the gains. -Victor Burek, Churchill Mortgage


Today's Most Prevalent Rates

  • 30YR FIXED - 4.625-4.75
  • FHA/VA - 4.25-4.5%
  • 15 YEAR FIXED - 4.125%
  • 5 YEAR ARMS -  3.75-4.25% depending on the lender


Ongoing Lock/Float Considerations 

  • Rates moved higher in a serious way due to several big-picture headwinds, including: the Fed's rate hike outlook (and general policy tightening), the increased amount of Treasury issuance to pay for the tax bill (higher bond issuance = higher rates), and the possibility that fiscal stimulus results in higher growth/inflation.

  • Despite those headwinds, the upward momentum in rates has cooled off heading into the summer months.  This could merely be the eye of the storm, or it could end up being the moment where markets began to doubt that prevailing trends would continue.

  • It makes sense to remain defensive (i.e. generally more lock-biased) because the headwinds mentioned above won't die down quickly.  Temporary corrections can be explained away, but it will take a big change in economic fundamentals or geopolitical risk for the big picture to change.  While that doesn't necessarily mean rates have to skyrocket, there's a good chance it means rates will struggle to move much lower than early 2018 lows until more convincing motivation shows up.
  • 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.