Mortgage rates fell moderately to end the week after the House of Representatives failed to pass a tax and spending bill aimed at averting Fiscal Cliff tax increases on Thursday night.  This ended any hopes that a deal would be reached before Christmas and casts serious doubt as to whether or not the two parties can come together in a meaningful way before the New Year.  Stocks fell sharply on the news and bond yields backed down from their highest levels since late October.

Mortgage rates had already moderated after hitting recent highs on Tuesday, but today's gains in the bond market translate fairly well to the mortgage-backed securities (MBS) that most directly influence mortgage rates.  This allowed most lenders to put out their best rate sheets of the week.  Best-Execution for 30yr Fixed, Conventional loans continues to be most prevalent at 3.375%, though several lenders are well-priced at 3.25% as well.

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

With rates at their best levels of the week and more potential Fiscal Cliff Drama yet to come in the last few business days of the year, there's a compelling argument to play it safe in terms of locking and floating.  Bond markets will be closed next Tuesday for Christmas and open only a half-day on Monday.  Beyond that, the general level of market participation during the holiday week often times results in relatively more conservative pricing strategies among lenders.  Rates could still improve, but the risks likely outweigh the rewards until we get more clarity on the Fiscal Cliff resolution (or lack thereof) and observe the market's response.

Loan Originator Perspectives

"What do we do with bad people who are convicted of a crime? Lock em up. What do you do when you leave your car anywhere? Lock it up. What do you call two deer battling during breeding season who get their antlers tangled? Locked up. What do you do when you apply for mortgage and are offered historically low rates with marginal gain by floating, but much to risk ? Lock it up. Any questions about what to do with your interest rate when proceeding with the mortgage process? I hope not. :) " -Mike Owens, Parter, Horizon Financial Inc.

"Rates improved today as partisan politics rule the day. Many lock desks will be closed for Christmas break, so we'll hope the trend continues on Wednesday. Been a great year, sure grateful to all my clients for their trust and business. Merry Christmas!" -Ted Rood, Senior Originator, Wintrust Mortgage.

Today's Best-Execution Rates

  • 30YR FIXED - 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, but uncertainty surrounding the Fiscal Cliff is applying upward pressure.
  • 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).