Mortgage rates managed to maintain the improvement seen since Wednesday’s Fed announcement. While the Fed did indeed hike its policy rate, the hike was widely expected and had already been accounted for in longer-term bond markets (like those that dictate mortgage rates). The easiest way to understand this is to consider that most bond market securities (like Treasuries and Mortgage-Backed-Securities) can move/change every millisecond of every business day.
The Fed Funds rates, on the other hand, only changes/moves at the end of scheduled Fed meetings 8 times a year. If bond markets are reasonably confident the Fed is going to hike rates, they can begin trading accordingly well in advance. That exact scenario played out over the past month and accounts for much of the move higher in rates from late February through Fed day.
Because bonds were already in position for the Fed hike, they were free to react to other aspects of the Fed policy. Specifically, investors were expecting the Fed’s forecast to show faster rate hikes in the future. This accounts for some of the move higher in rates in early March. The Fed’s actual forecast turned out to be fairly tame and rates were thus able to move quickly lower.
There hasn’t been much movement since the initial reaction to the Fed this past Wednesday. Conventional 30yr fixed rates continue hovering around 4.25% for top tier scenarios.
Loan Originator Perspectives
Good week for rates. We made up quite a bit of ground since Monday. And that leaves us right back towards the middle of the 2.32-2.62 range on the 10 year Treasury bond since the election. If you have overnight protection, meaning you can wait until Monday pre-market to lock, you may want to see if things remain the same over the weekend. If not, you’ve recovered and 1/8th-1/4 since Monday, so take the gains and call it a day if you’re risk averse. The choice is always yours. Happy St. Patrick’s Day! –Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC
Bonds posted a green day, in honor of St Patrick, and my pricing improved over Thursday’s. It appears for now that our rising rate trend is on hold. That hardly guarantees a looming rally, but sure beats watching a daily bond sell-off. I still think rate sheets haven’t seen the full benefit of this week’s gains, so looking to float this weekend. Next week’s economic calendar shows limited significant events until Thursday, my hunch is pricing improves over the weekend. Hope your brackets aren’t busted yet! –Ted Rood, Senior Originator
Today’s Best-Execution Rates
- 30YR FIXED – 4.25%
- FHA/VA – 4.0-4.25%
- 15 YEAR FIXED – 3.5-3.625%
- 5 YEAR ARMS – 2.75 – 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Some investors are increasingly worried/convinced that the decades-long trend toward lower rates has been permanently reversed, but such a conclusion would require YEARS to truly confirm
- Still, it would take something very big and unexpected for rates to make a big, sustained push back toward pre-election levels. Even then, it would take time to confirm such a shift.
- With fiscal and monetary policy paths both clearly putting pressure on rates, at least one of those would need to make a noticeable change before anything but a cautious, lock-biased approach makes sense as a baseline strategy. Floating should only be considered as a tactical opportunity to capitalize on temporary corrections.
- 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.