Mortgage rates were crushed today, moving higher at the fastest single-day pace since 2013.  The average lender saw a full eighth point hike in 30yr fixed rates today, which roughly equates to 1 point in terms of upfront cost (1% of the loan amount).  Movement of this magnitude is not common.  There are only 14 other days in the past 5 years that have been this bad or worse. 

Being among the top 15 days of the past 5 years puts it in a special category of days that are completely different from the average "very good" or "very bad" day.  It takes a certain level of capitulation, panic, and momentum to break through the average day's range of rate movement.  Once that happens, the follow-through almost defies logic, much like histories biggest volcanic eruptions are nothing like thousands of uneventful examples of some terrestrial substance leaking timidly out of a hole in the ground.  Like the volcanoes, these awe-inspiring eruptions in volatility can be beautiful or terrible.  Today we got the terrible kind.

How about a bit of perspective?  I'll paraphrase the reaction that most old people have when seeing some internet whippersnapper talk about how much higher rates moved.  "An eighth of a point?!  Bah!  That's Nothin'!  Why, when I was your age, mortgage rates only went one direction--UP!  And they went up 2 times on Sundays!  You're upset that rates moved up to the 'low fours?'  We were THANKFUL when rates made it back down to the 'low fourTEENS' in my day!"

Yes, old person, rates were higher in the 80's.  I understand that you are indignant about any move in the low fours being considered 'dramatic,' but it is a different time, socioeconomically speaking.  The generation facing 18% rates in the early 80's was a lot happier about it than the current generation is about facing--well... anything that has to do with a house payment.  With prices and rents where they are relative to many incomes, all that matters is that today is a big jump from yesterday.  If you really want to put this in perspective, you could point out that an eighth of a point change in rates comes out to about $14/month on a $200k loan.

So what now?  I'll go back to what I said yesterday afternoon: "the highest potential for volatility begins tomorrow morning and only increases heading into Friday's employment data."  The third bullet point in the ongoing lock/float considerations isn't a bad one to keep in mind either.

If you want to know more about the source of inspiration for today's movement, check out the latest MBS Commentary or Housing Newsletter.

Loan Originator Perspective

"On the day before the critical Jobs Report for December and in a month where it's likely the Fed starts to hike rates, we get the worst day for bonds since 2013.  Is it an ominous precursor to the near term future or just a short term bump in the road?  I would not be rolling the dice here and I think locking your rate is the prudent move until we get a convincing indication otherwise." -Hugh W. Page, Mortgage Banker, SeacoastBank

"Brutal day for mortgage rates.  Tomorrow is the almighty jobs report, if anything can reverse the current course it would be a weak employment number.  We can hope for bad news, but if the number is in line or better, we can ascertain that the FED will most certainly continue the course of a rate hike with the potential for additional hikes in the near future thereafter.  I would not lock on a day like today as the selling is over done, but a good report tomorrow can double up on the current selloff.  Our saving grace is the current range with the top of that range still intact for now.  We've been on thin ice since the end of October and it may be time for the rooster to come home to roost.  Generally we are still at amazing levels for mortgage rates, if you are happy with your rate you should take the risk off the table and move along with your life.  As always time plays a big role in floating, for all loans closing in 2016 you may have enough time to weather the current storm. " -Constantine Floropoulos, Quontic Bank

Today's Best-Execution Rates

  • 30YR FIXED - 4.0-4.125%
  • 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).