Mortgage rates held steady today after spending the past 2 business days recovering from the worst day in more than 2 years last Thursday.  As we discussed yesterday, those 2 days of gains have erased more than half of Thursday's carnage, but today's sideways move means rates are still slightly elevated compared to most of the past few weeks.  The average lender continues to quote conventional 30yr fixed rates of 4.0% for top tier scenarios. 

4.0% is 'elevated' in its own right when compared to the entire month of October and first part of November.  It's been more of a transitional rate for the mortgage market, with clear instances of rates moving up to 4.125%-4.25% on the worst stretches of 2015, and the bulk of the better days being spent between 3.625 and 3.875%.  If it's to be transitional again, it would seem that we're waiting for next week's Fed Announcement (the one where they're expected to hike short term rates) before we find out which side of the fence we'll land on.  Between now and then, risk and reward for locking floating should die down, relative to last week's volatility.

Loan Originator Perspective

"Floating has continued to pay off since the jobs report on Friday.  Economic data is light this week, but we are in the middle of a auction cycle.  Tomorrow brings us the important 10 year note auction.   At this point, I am not sure you will gain much by floating.  If you are happy with today's pricing, you should consider locking in the gains.  If you want to continue to float, then you might as well float through Thursday as it isn't uncommon for rates to rally once all the new supply has been absorbed.   Thursday brings us the final auction of the week." -Victor Burek, Churchill Mortgage

"Bonds sat sedately within yesterday's ranges today, and rates were unchanged.  It would have been great to see our prior gains grow, but can't say I am surprised they didn't.  When we're in a holding pattern (as we are now, and have been much of the year), I'll typically lock loans when pricing suits my clients' needs, rather than potentially end up losing ground if rates rise.  It all boils down to risk tolerance and how critical the rate or lender credit is for each borrower.  I still don't see much motivation for rates to change dramatically anytime soon.  The Fed's near certain rate hike is priced into the current market.  " -Ted Rood, Senior Originator

"Mortgage bonds pushed higher today only to give up some of their gains during the session.  Markets may be testing a range as they wait for the Fed meeting next week.  At this point you need to make the decision to lock or float into the Fed meeting.  I'm currently favoring locking especially if you have low risk tolerance. "  -Manny Gomes, Norcom 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).