Mortgage Rates Improve Slightly

Mortgage rates fell modestly today, and thus managed to avoid heading any closer to the 7-year highs just overhead.  Underlying bond markets benefited from concerns about Italy's stance on the Euro currency based on one Italian official's comments.  Those were later characterized as "just one man's opinion," thus not having a big, lasting impact on rates.

To understand what's going on here, first consider that interest rates are based on supply and demand in the bond market.  The more that investors want to buy bonds, the lower rates go.  When something threatens the stability of some major world economy (like the European Union could be somewhat threatened by Italy moving back to its own currency), investors tend to buy more bonds of safer haven countries.  

Ultimately, the European news wasn't a huge deal for the bond market--thus the fairly small reaction (especially in the US).  Still, it was enough for a token improvement in rates.  This leaves us squarely in the same range that's dominated most of the past 2 weeks as we head into the week's most important calendar events.  Whereas we looked to the Fed to break us out of this range last week, we're now looking to the upcoming data to carry that same banner.  Much like the Fed, it may or may not be up to the task.  All we know is that the potential/risk is there for bigger gains/losses starting tomorrow, but especially after Friday's big jobs report.

Loan Originator Perspective

Bond markets posted meager gains today while remaining firmly within recent ranges.  There's limited data to inform traders until Friday, when September's NFP report hits.  Know I sound like a broken record here, but I don't see any imminent rallies looming, so will keep locking loans closing within 45 days until said rallies materialize. -Ted Rood, Senior Originator

Today's Most Prevalent Rates

• 30YR FIXED - 4.75-4.875%
• FHA/VA - 4.5%
• 15 YEAR FIXED - 4.25%-4.375
  
• 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.
  
  
• Rates cooled off heading in the summer months, but that proved to be the eye of an ongoing storm.  As long as economic data remains strong, rates can continue to move higher in general, even though there may be brief periods of correction.
  
  
• It makes sense to remain defensive (i.e. generally more lock-biased) because the headwinds mentioned above won't die down quickly.  It will take a big change in economic fundamentals or geopolitical risk for the big picture to change.  

• 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.