Mortgage Rates Edge Lower, But Don't Get Used to It

By: Matthew Graham •

Mortgage rates were slightly lower today.  Unfortunately, that may not be the case by tomorrow morning.  Underlying bond markets (which dictate rates) lost ground throughout the day.  If trading levels don't change by tomorrow morning, the average lender will be back up at the highest rates in 7+ years.  Many are close enough as it is.

The key feature of the past 24 hours was the midterm elections.  Bonds improved when democrats won control of the house.  This was in line with the average prediction for how elections might impact rates.  That said, the fact that bonds have already fully erased that overnight move should let you know just how little the elections mattered in the bigger picture.  The longer-term headwinds for interest rates remain entrenched, and it will take a long time or a massive amount of drama for that trend to change.  Drama can come in the form of a shift in the economy or a much bigger stock sell-off than we saw in October.

 See Rates from Lenders in Your Area

Tomorrow brings a policy announcement from the Federal Reserve (the Fed), but there's essentially no chance of a policy change.  The Fed has stuck to a fairly regular schedule of hiking rates at every other meeting.  Markets currently expect the next Fed rate hike in December, although the verbiage they use in tomorrow's announcement could nonetheless cause some smaller-scale volatility for mortgage rates.


Loan Originator Perspective

Bond markets rallied on the heels of last night's mixed election results, but still remained below last week's best levels.  My pricing was incrementally better than yesterday's.  Covering the rapidly ballooning deficit means selling far more treasury bonds, which sure won't help rates.  I'm still locking early.   -Ted Rood, Senior Originator

Lender pricing is a little better following the mid term election results of last night.   With the improved pricing, my clients are favoring locking in.   Not sure what on the horizon, other than some breaking news event, that can help rates move lower than current lenders.   Risk favors locking. -Victor Burek, Churchill Mortgage


Today's Most Prevalent Rates

  • 30YR FIXED - 5.0%
  • FHA/VA - 4.5%-4.75%
  • 15 YEAR FIXED - 4.5%-4.625%
  • 5 YEAR ARMS -  4.375%-4.875% depending on the lender


Ongoing Lock/Float Considerations 

  • Rates continue coping with 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 (which certainly seems to be the case so far in 2018).

  • While rates were able to recover and stay sideways in the summer months, September and October have seen a surge up to the highest levels in more than 7 years. 

  • Upward pressure can continue as long as economic growth and inflation continue running near long-term highs.  Stay defensive (i.e. generally more lock-biased).  It will take a big change in economic fundamentals or geopolitical risk for the big picture to change.  Such things tend to not happen as quickly as we'd like.
  • 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.