Mortgage rates were essentially unchanged for many lenders today and just barely higher for others.  There were no major sources of inspiration as underlying financial markets are still getting back in the swing of things after the holiday season.  One of the lingering effects was a wider range of quotes between lenders.  Some tend to price rate sheets more conservatively (i.e." higher") over the holidays while it's business as usual for others.  That means we had more than a few lenders quoting conventional 30yr fixed rates of 4.0% while a few of the less aggressive lenders were still up at 4.25%.  That range is about twice as big as normal, but it's narrowed over the past two days with the higher end moving down to 4.125%.

The next three days bring the weeks most significant economic data.  The biggest source of risk is Friday's Employment Situation, although tomorrow's data can certainly get the ball rolling.  For now, when it comes to making a case for rates to hold their ground or move lower, the burden of proof is on economic data.  Specifically, it would need to come in much weaker than expected.  If the general tone of the data merely holds steady, that will mean that the economy and financial markets are at least coping with the Fed's rate hike.  The longer it copes, the more rates will inch higher.

Loan Originator Perspective

"Rates idled in neutral again today, and were virtually unchanged.  Tomorrow the excitement begins with ADP's December jobs projection.  It's unlikely rates will drop dramatically unless employment completely falls below expectations, and even then it's not guaranteed.  My pipeline is locked, and any new loans before Friday's NFP report will likely be as well.  I don't see any point in risking a lot to gain a little." -Ted Rood, Senior Originator

"All things considered we’re off to a pretty good start to 2016.  We sit here post Fed. rate hike with rates we’ve seen many times over the past year.  Despite that relatively good news I feel like we have a very tenuous hold on this range.  I don’t have much of a technical argument it’s more just a gut feeling.  With big news on the horizon this week (Jobs report Friday) I would recommend a defensive stance.  Current rates are not nearly as bad as they could be if Friday’s jobs report is strong. " -Jason B. Anker, Vice President- Loan Officer at Salem Five

Today's Best-Execution Rates

  • 30YR FIXED - 4.00-4.125%
  • 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

  • In 2015 global interest rates rose unevenly from a long-term lows brought about by the onset of quantitative easing in Europe.  European rates moved most (first lower, then higher), but rates in the US, including mortgage rates, are always taking some of their guidance from the global picture.
  • Just as European rates were bouncing at all-time lows, the Fed began talking up its plans to hike its policy rate (Fed Funds Rate).  While the Fed rate doesn't directly affect mortgages, the two are generally connected in the long run.  They become more disconnected when the economy begins to contract (because Fed policy is slower to respond to changes in the economy).

  • The Fed finally hiked on December 16th.  This implies a constant underlying pressure toward higher interest rates--as long as the economy doesn't begin to contract.  Opinions vary greatly as to when we'll see the early signs of the next economic contraction.  Some would argue we're already seeing them.  This, along with persistently low inflation, has helped rates avoid taking a big hit from the Fed rate hike, though we're still waiting for the first major trend of 2016 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).