Mortgage rates were sideways to slightly lower today as underlying bond markets continue to operate in holiday mode.  While that can occasionally result in inexplicable volatility, market participants are generally trying not to rock the boat heading into the end of the year.  That mission was accomplished today as bond markets stayed well within the confines of last week's range.

The average rate sheet was almost imperceptibly stronger than last Thursday's, but in many cases, not enough to result in a noticeable improvement to quoted rates and fees.  In fact, any lender who improved today only did so in the form of microscopically lower closing costs (as opposed to a change in the interest rate itself).  The most prevalent conventional 30yr fixed quotes have been in the 4.0-4.25% range with a wider-than-normal spread between lenders.

Loan Originator Perspective

"Rates continue to follow the recent trend of improving.    Many lenders have repriced for the better but most have not passed along all the gains.  I favor floating here to see how much further rates might rally.   This week is month, quarter and year end which are all supportive for bonds.  We also have new Treasury supply hitting this week.  It is quite common for bonds to rally once all the supply has been absorbed by the markets. " -Victor Burek, Churchill Mortgage

"Mortgage rates seem to be treading water after the much telegraphed Fed rate hike earlier this month and a holiday season that hasn't generated anything of significance to indicate a new and pronounced trend is now in place.  The year 2016 is sure to be interesting (once again) as we wait to see if rates will finally begin to rise or instead more uncertainty and thus volatility will continue to be the norm.  My pesonal opinion is the latter is more likely so my lock advice comes down to your risk tolerance.  If you prefer certainty and don't like to gamble then lock your rate.  If you like more risk, stay in close contact with your loan officer, stay tuned in to Mortgage News Daily, and be read to pull the trigger at anytime." -Hugh W. Page, Mortgage Banker, SeacoastBank

"Unless you have to close early next week or due to the new TRID timeline delays you must lock to preserve your closing date, locking your loan today does not seem necessary. Due to the lack of participation this week, any moves will be irrelevant as they will all unravel in the following weeks as data and traders are back in full force. Bond markets have consolidated pretty well around 2.25, floating makes the most sense.  With the exception of loans closing early next week I am floating the balance of my pipeline. " -Constantine Floropoulos, Quontic Bank

"Bond markets were sedate today, as expected on a holiday week.  MBS did post sufficient gains for a few lenders to improve rates mid-day, but the differences were hardly significant.  The rest of the week also appears calm, with some chance of improvement on Wednesday or Thursday (short session) due to year end portfolio balancing.  I'll consider locking new deals then, or wait until next Monday, when markets should resume normal trading." -Ted Rood, Senior Originator

Today's Best-Execution Rates

  • 30YR FIXED - 4.00-4.25%
  • FHA/VA - 3.75%
  • 15 YEAR FIXED - 3.25-3.375%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • 2015 has been largely about global interest rates rising unevenly from a long-term low brought about by the onset of quantitative easing in Europe.  European rates are most directly affected, but rates in the US have often taken cues for similar movement. 
  • As the European rate rally fizzled out, the Fed began telegraphing its intent to hike rates.  While the Fed rate doesn't directly affect mortgages, the two are still loosely connected over time.  They become more disconnected when the economy begins to contract.  This helps longer term rates like mortgages move lower even while the Fed rate his steady or rising.

  • The Fed finally hiked on December 16th, but there was no immediate reaction in mortgage rates.  Some think that an economic contraction might not be too far away.  Others are concerned about a lack of inflation (which is good for longer term rates like mortgages).  Bottom line: the Fed rate hike has not been the death knell for low mortgage rates that many feared it would be, although the near term range is uncertain and rates could be more volatile than normal as we wait for a new trend to emerge.

  • 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).