How Low Can Mortgage Rates Go?

By: Matthew Graham •

Mortgage rates are on a tear.  In the bigger picture, 2019 has been the best year in more than a decade.  Only 2002 was arguably on the same level in terms of the move from peak to trough.  If we include late 2018's higher rates the overall move is now bigger than the one seen in 2008/2009.  

While someone somewhere might be willing to draw a few parallels, 2019 is nothing like 2009.  In other words, trade war fears and global growth concerns (which deserve most of the credit for the downward momentum in rates) are nothing like the financial crisis and Great Recession.  Why, then, have the current motivations packed such a punch?  

The biggest reason for the size of 2019's move is the extent to which rates were arguably "too high" at the end of 2018.  It's really that simple.  There was a lot of defensiveness in play with respect to how high rates might go--so much that traders lost sight of what was sustainable or logical.  Simply put, there are reasons for rates to be at current levels.  The starting point in late 2018 means they've had to traverse a great distance to get there.

 See Rates from Lenders in Your Area

Can rates go lower from here?  History suggests it's possible on two fronts.  First off, they've been a bit lower in the past--both in 2016 and 2012.  Beyond that, the 2011/2012 drop in rates was actually a bit bigger than the current example.  If we manage to match the magnitude of that move, rates could easily break all-time lows.  That's by no means a prediction--just a bit of perspective.  If anything the size and duration of the rate rally suggest greater risk of rates bouncing higher.  Until then though.... Enjoy!


Loan Originator Perspective

As expected, the lack of meaningful economic news made today's bond sessions fairly uneventful.  As the day progressed, both treasuries and MBS posted minimal gains, but not enough to prompt lender reprices.  It may be worth floating overnight to see if this PM's gains translate to better pricing tomorrow.   - Ted Rood, Senior Originator


Today's Most Prevalent Rates

  • 30YR FIXED - 3.5%
  • FHA/VA - 3.25%
  • 15 YEAR FIXED - 3.125 - 3.25% 
  • 5 YEAR ARMS -  3.25-3.75% depending on the lender


Ongoing Lock/Float Considerations 

  • 2019 has been the best year for mortgage rates since 2011.  Big, long-lasting improvements such as this one are increasingly susceptible to bounces/corrections.

  • Fed policy and the US/China trade war have been key players

  • The Fed and the bond market (which dictates rates) will be watching economic data closely, both at home and abroad, as well as trade war updates. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will 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.