Mortgage rates moved slightly higher to begin the last full week of 2012 after fighting back against recent weakness on Friday.  Bond markets did little to react to economic data or events today, instead moving higher in anticipation of events and trading considerations in the weeks to come.  Thursday remains the weakest day we've seen in several weeks, depending on the lender and today's average rate sheet is somewhere between there and Friday's bounce back.  Best-Execution for 30yr Fixed, Conventional Loans continues to hover between 3.25% and 3.375%. 

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

There's quite a bit of extra "stuff" packed into the current week in order to make room for the 1.5 days off due to next week's Christmas holiday.  Added information is added uncertainty for bond markets and that could be part of the reason for today's weakness (when bond markets in general are weaker, mortgage rates tend to move higher, though in varying proportions).  But today's weakness hasn't been clearly linked to headlines or events in any sort of timely manner.  Instead, we've seen a general, pervasive weakness which may line up with the general, pervasive issue of the Fiscal Cliff.

To whatever extent markets perceive that a Fiscal Cliff deal is achievable or imminent, the implication is likely an initial move higher for interest rates.  How high and for how long, remain to be seen, but until we actually get a deal, bond markets have to be defensive enough to account for multiple outcomes.  There have been several pieces of news over the weekend and into this afternoon that seem to advance the prospects of a deal.  This is the 800-lb gorilla in the room as far as that "pervasive weakness" is concerned. 

The silver lining is that MBS (the "mortgage-backed securities" that most directly influence lenders' rate sheets) are less-affected by the drama than their US Treasury cousins.  That doesn't mean that mortgage rates won't move higher if broader bond markets continue to move higher, simply that they may continue to do so at a gentler pace.

Loan Originator Perspectives

"There are so many potentially conflicting data points to consider as you purchase or refinance. We have Fed purchasing of mortgage backed securities to the tune of $40B per month, Operation Twist modifying end of year, fiscal cliff concerns, EU is a mess and more. Rates are fantastic. Lock and be happy. " -Matt Hodges, Loan Officer, Presidential Mortgage Group.

"End of the year often slower, but certainly not this year. Between submissions, new prospects, current files, and closings, it's crazy. What a nice problem to have! Fortunately, our underwriter is very dedicated, turn times not rising yet, but have the potential to. Rates hanging around same range, investors have no idea what outcome and effects of fiscal cliff debate will be. I'm locking, rates too good to float, and want make sure I can deliver pricing to clients as expected!" -Ted Rood, Senior Originator, Wintrust Mortgage.

"This calendar year has been extremely hectic for me and my clients over previous years. Loan volume with my lenders are up 2-3 times more over what has been experienced in previous years. Turn times for refinances are definitely suffering as a result with the typical refinance taking more than 30 days to close. Similarly Appraisal volume is being impacted as a result of increased loan application volume. Lenders are having difficulty even meeting 45 day locks let alone 30 day rate locks. I would recommend that all consumers be extremely diligent with the financials being requested of them and do not delay when being asked to provide additional documentation as this will undoubtedly impact their ability to close quickly. I would recommend locking at no less than 45 days until loan application volume has stabilized. Traditionally in years past mortgage rates tend to rise towards the end of the year and 1st quarter of the new year. Rates so far have remained very low into the year end so be mindful that things could change very rapidly and do not hesitate to lock your rate in as the environment can change without much notice." -Chris Toy, Owner/CEO,  Priority Capital Funding.

Today's Best-Execution Rates

  • 30YR FIXED - 3.25-3.375%
  • FHA/VA - 3.25% (varies more between lenders than conventional 30yr Fixed)
  • 15 YEAR FIXED -  2.875% - 2.75%
  • 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
  • This 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).