Mortgage rates fell today.  The move wasn't big, but it was enough to claim the 5th best spot of 2014.  The 4 other days were consecutive and began on December 12th.  While this is a positive turn of events, it's not the product of any great determination on the part of market participants.  That's easy enough to see due to the fact that market participants are largely absent relative to non-holiday weeks. 

Perhaps even more interesting than today being a "top 5" day is that it fully erases the small spike in rates that began on Tuesday of last week.  Wednesday morning wasn't great either, but as hoped, that was the worst of it and rates have eased lower every day since then.  The current movement doesn't really speak to any longer term trends, but it's a welcome recovery nonetheless.  The most prevalently-quoted conforming 30yr fixed rate is now back down to 3.875% with some lenders at 3.75% for top tier borrowers.

Loan Originator Perspective

"As we head into the last business day of the year tomorrow we find ourselves below 4% again on a 30 yr Fixed Rate Mortgage for the best scenarios. With 2015 right in front of us and the Fed likely moving towards a policy rate increase by mid year at some point markets may begin to reflect this reality. Of course, wildcards abound and rates could stay lower longer but I think the risks for higher rates has gone up. If you're closing in 30 days or less why not protect some of the best pricing you've seen all year. Beyond that, assess your risk tolerance and keep your loan officer on speed dial." -Hugh W. Page, Mortgage Banker, Seacoast Bank

"Trading volume is low this time of year as traders take time off for the holidays. This could cause larger price swings than normal. Trading more than likely will not get back to normal until this coming Monday. If you have the stomach for it, floating during this time period could at the least give you more time and hopefully the ability to lock into a shorter lock period. " -Manny Gomes, Branch Manager Norcom Mortgage

Today's Best-Execution Rates

  • 30YR FIXED - 3.75 - 3.875
  • FHA/VA - 3.25
  • 15 YEAR FIXED -  3.125
  • 5 YEAR ARMS -  3.0 - 3.50% depending on the lender

Ongoing Lock/Float Considerations

  • The hallmark of 2014 has been a narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets punished that imbalance with a paradoxical move lower.  This continues to serve as a reminder that prevailing beliefs about where rates will go won't necessarily be correct simply because they're the most prevalent.

  • European bond yields have trended constantly lower in 2014, thus playing a prominent role in keeping US rates lower than they otherwise might be.  Many feel that Europe will continue to slide until their central bank engages in US-style quantitative easing.  Some see this happening in early 2015.  In any event, we're looking for a turn in Europe, first and foremost, before worrying about the longer-term trend in bond markets being at serious risk of reversing.
  • Much of 2014 could be considered "sideways to slightly lower" in terms of mortgage rates.  All things considered, it actually has been a remarkably gentle drift lower.  Things became less gentle in mid October when rates briefly broke into the high 3's.  They came back for a more gradual, determined push into the 3's in December.  Some of the late-year strength is being chalked up to an epic slump in oil prices.  This drags inflation expectations lower, which is a net-positive for interest rates.

  • As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).