MARKET TRENDS BLOG POST

Rates Still Flat at 8-Month Lows

- 06/26/2017

Mortgage rates were steady to slightly lower today, depending on the lender. Underlying financial markets continue moving in a narrow range--something that's not uncommon for the first few weeks of the summer. It's that market movement that can result in mortgage lenders issuing mid-day reprices. The more volatile and the bigger the moves, the more likely lenders are to reprice. Today saw zero reprices.

Rates may have risen this morning were it not for weaker economic data. In general, weaker data tends to drive demand for the safe-haven of the bond market (which results in lower rates). This morning's Durable Goods data was noticeably weaker, and bonds improved immediately following its release at 8:30am. Though the improvement in markets was modest, it meant that most lenders were looking at bond prices that were at least as good as last Friday's.

Despite today's relative lack of change, the potential for movement is generally higher heading into the rest of the week. Risk-averse borrowers should consider that we're effectively at the lowest rates in more than 8 months. Risk-tolerant borrowers should simply make sure they have a stop-loss in place (in terms of how much rates could rise before locking at a loss) and a game plan established with their loan originator.

Loan Originator Perspectives

It must be summer, as bond markets continued slumbering, with rates virtually unchanged today. The rest of the week MAY bring some minor pricing improvements due to month end demand, but hard to hope for much more than that. If you're floating, have realistic goals for your pricing; it's unlikely we'll see rates move substantially before the end of next week (if then). I'm not in a big hurry to lock new loans, particularly those closing in August. - Ted Rood, Senior Originator

Today's Most Prevalent Rates

• 30YR FIXED - 3.875-4.00
• FHA/VA - 3.5-3.75%
• 15 YEAR FIXED - 3.125-3.25%
• 5 YEAR ARMS - 2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

• Investors were relatively convinced that the decades-long trend toward lower rates had been permanently reversed after Trump became president, but such a conclusion would require YEARS to truly confirm.
• Instead of continuing higher in 2017, rates instead formed a narrow, sideways range, and held inside until April. Investor perceptions are shifting such that fiscal reforms and other policy developments will need to live up to expectations in order to push rates higher. Geopolitical risks would also need to avoid flaring up (more than they already have).
• For the first time since the election, we're in a rate environment where you wouldn't be crazy not to lock at every little opportunity/improvement. Until/unless it's broken, the highest rates of early-2017 mark the ceiling, and we're now waiting to see how much lower we can go from here.
• 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.

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