Are Mortgage Rates Really Under 4.00%? Yes and No

By: Matthew Graham •

Mortgage rates were mixed today, with some lenders holding steady while others offered mid-day improvements in response to strong performance in the bond market.  In either case, today's loan quotes are likely to be as good as they've been since the first few weeks in 2018. But are they under 4.00%?  That's the claim being made by more than a few news stories out there.  Let's take a look at the underlying facts.

First off, any time you see consensus among mortgage rate headlines on a Thursday morning, chances are the story is citing Freddie Mac's weekly mortgage rate survey.  Today's survey has the average 30yr fixed quote dropping to 3.99% for the first time since (you guessed it) the first few weeks of 2018.  But that doesn't mean anyone can go down to the corner store and pick up a 3.99% mortgage.  

 See Rates from Lenders in Your Area

Freddie's survey tends to run a bit below the true 'average' 30yr fixed rate quote.  In general, it's pretty close to a "top tier" number because it assumes 20% down and none of the other factors that legally require lenders to charge more for conventional conforming loans.  As such, borrowers with perfect credit who are paying at least 20% down (or who have at least 20% equity) in a single-family owner occupied home are indeed seeing quotes of 3.875% to 4.00%.  

"But wait!" you're thinking, "haven't you said that the 3.875% rate is available several times recently before today?"  Indeed I have.  That's because rates haven't changed much this week.  3.875% is definitely on the lower end of the rate quote spectrum right now, as was the case for 2 days in late March 2019.  That's why my March 26th headline was "For Mortgage Rates, High 3's In Sight Once Again," an article which also mentioned: "Seeing 4.0% means that a few of the most aggressive lenders are going to be offering 3.875% on truly perfect scenarios."

In other words, yes, rates (for some) are really under 4.00% as has been the case several times since late March.  But looked at another way, no... rates aren't under 4% because the most prevalent rate quote--even for strong scenarios, is still 4.0%.  In fact, 4.125% is still more prevalent than 3.875% at this stage.  It will take several weeks of ongoing strength and resilience in the bond market if we're going to see a true return to a "high 3's" environment--one where 3.75% and 3.875% are the two most prevalent rates.  We're heading in the right direction, but we're not there quite yet.


Loan Originator Perspective

Bond markets posted minimal gains today, as rates remained near their best levels since late 2017.  Tomorrow brings inflation data, as well as end of May.  I'm locking my June closings while rates are great, still floating those closing further out, for clients with a measure of risk tolerance.  - Ted Rood, Senior Originator


Today's Most Prevalent Rates

  • 30YR FIXED - 4.0%
  • FHA/VA - 4.0%
  • 15 YEAR FIXED - 3.875% 
  • 5 YEAR ARMS -  3.875-4.25% depending on the lender


Ongoing Lock/Float Considerations 

  • Early 2019 saw a rapid reevaluation of big-picture trends in rates and in markets in general

  • The Federal Reserve has been a key player, and while they aren't the ones pulling the global economic strings, their response to the economy has helped rates fall more quickly than they otherwise might.

  • Based on the Fed's laundry list of concerns, the bond market (which determines rates) will be watching economic data closely, both at home and abroad.  The stronger the data, the more rates could rise, while weaker data could lead to new long-term lows.  
  • 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.