Mortgage rates were completely unchanged today despite the 3-day Labor Day weekend.  Historically, there has been a fair amount of volatility between the Friday before Labor Day and the Tuesday after.  The fact that today broke with tradition is a testament to the uncertainty facing markets ahead of several key events later this week and next week.  The Best-Execution rate for Conventional 30-yr Fixed Loans remained unchanged at 3.5%.

(Read More:What is A Best-Execution Mortgage Rate?)

Even though the broader average rates were unchanged today, we did note a few instances where specific lenders were priced significantly worse than Friday.  In other words, rates were higher--not necessarily to the point of bumping Best-Execution up to 3.625%, but the borrowing costs associated with Friday's rates were roughly half a point higher.  "Half a point" is one-half of 1% of the loan amount or $500 for every $100k financed.  

It's rare to see that much movement from day to day and such moves are normally associated either with big movements in the markets or big changes behind the scenes for specific lenders or the mortgage industry at large.  We already can plainly see that the underlying markets (at least those affecting mortgage rates) didn't really move today, so that leaves "behind the scenes" changes as the likely motivation. 

To that end, we can only speculate, but in this case we know the speculation will be relevant, if not now, then soon.  Reason being, the same behind-the-scenes changes have taken place before.  The changes we're alluding to have to do with the government imposing increased "guarantee fees" for Fannie Mae and Freddie Mac (read more here: FHFA Announces Another 10 Basis Point Increase In G-Fees).

As we said, this has happened before.  We first discussed the implications on January 4th here: Tax Cut Extension Now Officially Raising Mortgage Rates.  It's interesting to note that today's seemingly inexplicable increase in borrowing costs versus Friday could easily have been the subject of this analysis from MND Contributor Victor Burek 9 months ago:

"I think some other lenders have added it already. One of my most frequently used lenders is about 30bps off in price despite unchanged MBS prices."

To be clear, the increased costs at a few lenders today does not have to do with the Tax-Cut extension, at least not directly.  But the ingredient of increased guarantee fees is the same.  The key consideration is that EVEN IF this isn't the reason for today's moves, we know it will be a factor for other lenders fairly soon.  Unless they all change the way they handled it last time (i.e. few, if any lenders phased it in gradually), it's fair to expect a sudden unexpected change in loan pricing.  Combine this with the lowest rates in about a month as well as two weeks of high volatility data ahead, and it presents a compelling argument to favor locking vs floating.

Long Term Guidance: We'd continue to advocate against trying to "get ahead" of current market movements due to the high degree of uncertainty.  The long-term direction of rates has been down, down, down, for the past year.  At some point, this will turn, and when it does, we highly recommend that you're prepared by drawing your OWN line in the sand as to how much rates would have to rise before you lock at a lost.  That's assuming you don't simply lock as soon as you're able.  For those with lower levels of risk tolerance who would consider movements in cost (despite unchanged interest rates) to be significant, or for those within 15 days of closing, or who are purchasing, this certainly favors locking.  We'd also consider that rates remain very close to all-time lows and uncertainty to all-time highs.  This also favors locking.

Loan Originator Perspectives

Andy Pada, Jr., VP - 1st 2nd Mortgage

Lock in. If your rate has not gone up yet, it will go up. The guarantee fees associated with Fannie Mae and Freddie Mac loans have been increased. This translates to higher rates. Don't get caught with the sudden rise.

Ted Rood, Loan Originator, Bank Star

Mortgage bonds are having a good day, hanging on to Friday's gains in advance of this week's economic calendar. Actual rates, however, haven't seen much movement as new Federal loan guarantee fees (and lenders' swelling profit margins) keep actual rates in check. High risk events in next few days for sure, question is whether consumers will see much rate improvement regardless.


  • 30YR FIXED -  3.5%
  • FHA/VA - 3.5% (varies more between lenders than conventional 30yr Fixed)
  • 15 YEAR FIXED -  2.875-3.00%
  • 5 YEAR ARMS -  2.625-3.25% depending on the lender

Ongoing Lock/Float Considerations 

  • Rates and costs continue to operate near all time best levels
  • Rates could easily move higher or lower, but given the nearness to all time lows, there's generally more risk than reward regarding floating
  • But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
  • (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario.  There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).