Mortgage rates were just slightly higher today, keeping them in a holding pattern just shy of 4-month highs.  This after an abrupt move higher from 6-month lows that began in late October after the Fed Announcement alluded to a December rate hike.  Although mortgage rates aren't directly tied to the Fed Funds Rate, most rates tend to move higher as the likelihood of a Fed hike increases. 

Today brought the 'Minutes' from the Fed's October meeting (the one that catalyzed the big move higher for rates).  The Minutes give the Fed an opportunity to convey a more detailed account of the discussion that led to the official policy statement released at the end of the meeting.  This is done in the spirit of transparency, depending on your point of view.  Some would say it gives the Fed a chance to manage market volatility because the Fed can edit the Minutes.  The theory there is that they could choose to rephrase sentences that might add on to any market movement they deemed overly abrupt following the announcement.  Long story short, it's their chance to clarify what they went on record as saying.

Today's Minutes were right down the middle.  The Fed's October statement definitely alluded to a December rate hike and the Minutes did fully supported that.  The lack of resulting movement in bond markets would suggest that investors have done a good job of interpreting the Fed's signals and have moved rates as high as they'd want them to be in mid-November, all other things being equal.  It continues to be the case that rates will have a hard time making any significant move lower until the rate hike is confirmed in mid December.  Combined with the potential for market volatility around the Thanksgiving holiday, risk outweighs reward when it comes to floating rates.

Loan Originator Perspective

"The FOMC released the minutes from their recent meeting today, with no surprises or impact on MBS.  Our pricing was essentially unchanged from Tuesday, very slight improvement but not a meaningful one.  We do seem to be establishing the new range for treasuries, with yields hovering between 2.25% and 2.3%.  I don't see a big move looming either way at the moment, barring apocalyptic ISIS drama.  I'm locking most deals within 30 days of closing, will discuss borrowers' risk tolerance for those further out." -Ted Rood, Senior Loan Originator

"Following the release of the FOMC minutes, MBS and Treasuries both moved to their best levels of the day.   The minutes contained no surprises.   If you can tolerate the risk, I would float today and evaluate your pricing in the morning.   The gains in MBS do justify reprices for the better but as of 2pm est only a couple lenders have passed along any improvement." -Victor Burek, Churchill Mortgage

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, rates had been at a crossroads, trying to determine if they would move back to 2015 highs or if the late summer swoon was merely the first wave of a longer campaign.

  • While there is still plenty of room to be concerned about increasingly weak global economic growth, that's not a solid enough reason to float in this environment.  With the Fed almost certainly on track for a December rate hike, there is much  more risk that rates move quickly higher vs quickly lower.  The big picture global malaise can serve as the basis for long term hope, but in the short term, assume upward pressure on rates when formulating your strategy.

  • 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).