Mortgage rates rose to new 3-Month Highs today as bond market weakness (read: higher rates) is magnified by holiday trading conditions. In other words, there are far fewer MBS (mortgage-backed-securities, which directly affect rates) being traded this time of year, so if there is an imbalance toward strength or weakness, it tends to have a bigger effect on lender rate sheets. In the current case, that imbalance favors higher rates.
In addition, lenders typically err on the side of caution (read: higher rates) during this time of year, regardless of bond market movement. That doesn't mean they'll always raise rates in December, simply that rates are set just a bit higher than they otherwise would be during more active trading. The combination of the market weakness and lender defensiveness made for new 3 month highs.
Most borrowers will experience the movement in terms of the closing costs associated with their quoted rate, while the rate itself remains unchanged. The most prevalently quoted rate for ideal, conforming 30yr Fixed loans is still 4.625% (best-execution), but 4.75% is as close as it's been since early September.
Loan Originator Perspectives
"A slow, short session in bond markets today ended with slightly higher
rates. We can hope it was caused by preoccupied traders eager to attend
to Christmas activities or year end portfolio balancing; time will
tell. This time of year typically has low loan volume, and current loan
applications are at an 8 year low. Merry Christmas all!" -Ted Rood, Senior Originator, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.625%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.5%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The prospect of the Fed reducing its asset purchases weighed heavy on interest rates for the 2nd half of 2013, causing volatility and generally pervasive upward movement.
- Tapering ultimately happened on December 18th, 2013. Markets had done so much to come to terms with it ahead of time that it essentially just confirmed the the 6 month move higher in rates, but didn't make for another immediate spike higher.
- That said, we should assume that we're still in a rising rate environment on average.
- NOTE: Lenders will be adjust rate sheets at various times in December and January to account for the most recent hike in Guarantee Fees. This will unequivocally raise rates by at least an eighth of a percent for almost every borrower, and in most cases .25-.375%. Depending on the lender, those changes will take place overnight and have already begun.
- (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario. There are many reasons a quoted rate may differ from 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).