Mortgage rates finally pulled back (higher)--albeit slightly--after spending most of the past 2 weeks moving significantly lower.  Much of the recent move lower in rates came courtesy of a weakening global economic picture and falling prices in stock markets and oil.  That was notable because it was helping rates in spite of some stronger economic data in the US--something that normally pushes rates higher.  With that dynamic in mind, rates could have been characterized as "moving lower against their will."  In other words, left to their own devices, it was unlikely that rates would continue lower in the absence of continued stock market losses.

Incidentally, the S&P 500 ended the day just barely higher than it did on Friday, despite trading lower during the day.  Still, to a much greater extent than recent days, stocks held their ground.  This was all the window of opportunity that interest rates needed to express a bit of their own personality.  Simply put, with stocks finally having a flat day, rates finally moved higher.

The damage isn't severe, by any means.  In fact, apart from Friday, today's rates are in line with the lowest levels in 2 months.  The average lender continues quoting conventional 30yr fixed rates near 4.0%, with some of the most aggressive lenders at 3.875% and others at 4.125%.

Loan Originator Perspective

"Bonds tread water, ending slightly lower today.  Despite the losses, some lenders issued improved PM rate sheets.  In any case,  the changes were inconsequential.  I'm not sold on a looming rally just yet, and as long as we're near the low end of short term ranges, I'll be locking on these dips.  For now, I am locking within 30 days of closing, and discussing options for borrowers further out, balancing risk/reward." -Ted Rood, Senior Originator

Today's Best-Execution Rates

  • 30YR FIXED - 4.00%
  • FHA/VA - 3.75%
  • 15 YEAR FIXED - 3.25%
  • 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).