US mortgage rates increased marginally for the third consecutive business day on Monday in what can only be described as a slight correction after they reached a one-month low last Wednesday.
Referring to “three-day corrections” and “one-month lows” right now might sound a lot more dramatic than it really is considering the realities on the ground. Most borrowers will be quoted the same mortgage rate as a week ago, with the sole difference being a small shift in the upfront fees. In fact, many lenders are still quoting the same figures as two days ago. There has been very little real volatility in rate markets recently.
Yesterday’s bond market weakness – which would normally correspond to an increase in mortgage rates – was caused by lackluster demand at the 10-year Treasury auction. Although there is not a linear link between bond prices and Treasuries, the latter do set the framework in which nearly every single domestic rate in this country moves, including mortgage rates.
Investors are reluctant to allow Treasuries too much free reign in either direction before monitoring what the Fed has on its mind about future rate hike prospects tomorrow. Another looming risk remains tax headlines, although it is unlikely that there will be any major development on this front before Friday.
US mortgage expert Ted Rood pointed out that bonds sold off yesterday, with demand being dampened by the looming tax reform as well as this week’s announcement by the Federal Reserve.
He went on to say: “At any rate, tomorrow's pricing looks to be worse than today's. I'm in ‘lock early’ mode, the trend is not our friend now, and we'll need domestic or international drama to change that.”
The most commonly quoted rate on the popular 30-year fixed-rate mortgages remains at around 4.0%. In the case of FHA/VA loans, this figure is closer to 3.75%, while a 15-year fixed-rate mortgage is generally available at about 3.375%. The lowest mortgage rates are those on 5-year adjustable-rate mortgages, which are currently available at between 2.75% and 3.25%.
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