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Mortgage Rate Volatility Remains a Risk

May 31, 2018
by admin

Mortgage rateswere effectively unchanged today, despite political developments in Italy providing plenty of justification to move higher. Specifically, Italian lawmakers found a way to move forward with staffing a new coalition government despite an apparent impasse earlier this week. That impasse was an underlying factor for the big drop in rates this week.

It could be that the news out of Italy was offset by other developments (tariff announcement and news of Deutsche Bank’s “troubled” status with the Fed), or it may have simply been too late in the day for European markets to react. We’ll know more about that tomorrow.

In addition to sorting out the true impact European politics (read more about why such a thing matters currently in yesterday’s article), tomorrow also bring the task of reacting to the big jobs report in the morning (which has tons of market-moving street cred). Add to that the fact that it’s the first trading day of a new month and there’s a clear case for volatility remaining a big risk for interest rates in the coming days.

Loan Originator Perspective

Italy’s internal discord MAY be waning, but bond markets are still pricing in some risk as tomorrow’s NFP jobs report looms. The safe/smart play is to lock here and grab the week’s gains. Doesn’t mean it’s guaranteed to be the right play, but a robust jobs report could raise rates quickly. – Ted Rood, Senior Originator

Today’s Most Prevalent Rates

  • 30YR FIXED – 4.5-4.625%
  • FHA/VA – 4.375%
  • 15 YEAR FIXED – 4.00%
  • 5 YEAR ARMS – 3.75-4.25% depending on the lender

Ongoing Lock/Float Considerations

  • Rates have been moving higher in a serious way due to headwinds that cannot be quickly defeated. These include the Fed’s increasingly restrictive monetary policy outlook, 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.

  • While we may see periodic corrections to the broader trend toward higher rates, it’s safer to assume that broader trend can and will continue. Until that changes, it makes much more sense to remain heavily-biased toward locking as opposed to floating.
  • 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.

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