Mortgage rates maintained their upward momentum today, rising to the highest levels since late September after Janet Yellen confirmed the Fed's rate hike outlook.  Bond markets (which include the mortgage-backed securities that most directly affect mortgage rates) began adjusting for that outlook last week after the Fed announcement.  Markets saw a roughly 1 in 3 chance of a December rate hike before that announcement, and better than 50 percent afterward.  

The Fed Funds Rate is a short-term lending rate that does not directly dictate longer term rates like most mortgages rates, but it's common to see the entire spectrum of rates move higher in anticipation of a Fed rate hike.  Clearly that anticipation increased last week, and only gathered steam into the current week.  With Yellen scheduled to deliver testimony at the House Financial Services Committee today, market participants reckoned she might make a comment or two that either validated or tempered last week's takeaways.  They were right!

In not so many words, Yellen confirmed the shift in tone represented by last week's official announcement.  Bottom line: the Fed looks pretty serious about hiking in December.  That confirmation was worth a bit of extra pain for bond markets, hence the move higher in mortgage rates.  The average lender is now back to 4.0% on conventional 30yr fixed quotes, with only the aggressive few offering anything in the high 3's.

Loan Originator Perspective

"More of the same today, as pricing worsened yet again.  Chairwoman Yellen testified on Capital Hill, and confirmed that the Fed is keen to raise their overnight rate in December.  While hiking short term rates may have little eventual impact on mortgage rates, for now the prospect is dampening demand for MBS.  I said it yesterday and it's still true today, the trend is not our friend.  Lock sooner and rest easier!" -Ted Rood, Senior Loan Originator

Today's Best-Execution Rates

• 30YR FIXED - 4.0%
  
• FHA/VA - 3.75%
  
• 15 YEAR FIXED - 3.25%
  
• 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

• 2015 has been largely about rates rising unevenly from a long-term low brought about by the onset of quantitative easing in Europe.  In May and June, the Fed increasingly began telegraphing a 2015 rate hike.  At that point, the "rising rate environment" seemed like a sure thing, but the Fed's plans hit several snags.  Economic data began deteriorating at home and abroad, causing markets to rethink the higher rate rhetoric.  Mortgage rates hit 6 month lows at the end of October, just as the Fed surprisingly changed it's policy statement to specifically suggest December as a rate hike possibility (something they haven't done since 1999).
  

• In the bigger picture, financial markets are still at a crossroads.  This is true for both stocks and rates, with each trying to determine if it will move back to 2015 highs or if the late summer swoon was merely the first wave of a longer campaign.
  
  
• If we take the Fed at their word, and if we forego any concerns about increasingly weak global economic growth, there is certainly more risk that rates move quickly higher vs quickly lower.  Hoping for lower rates is a long-term game meant only for economic pessimists who know the fact that the world is doomed will come to light fairly shortly.  The latter must also be willing to pay higher rates if they end up being wrong (or otherwise unwilling to wait long enough to be right).  All that having been said, those pessimists have increasingly been proven right as 2015 has progressed.
  
  
• 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, conventional 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).