Mortgage rates did something they haven't done all year today.  They actually improved in the face of a stock rally.  In fact, it was the third best day for stocks so far in 2016.  The other 2 days resulted in noticeable moves higher for mortgage rates.  The opposite was true today though there are a few caveats.

The correlation between stocks and interest rates actually remained very much intact.  Both were lower overnight, and rates simply moved higher much more slowly than stocks.  The net effect was a bond market than held fairly flat versus moderate gains in stocks.  Mortgage-backed-securities (which most directly affect mortgage rates) performed slightly better than Treasuries, allowing most lenders to offer improved rate sheets.  The range of conventional 30yr fixed rate quotes on top tier scenarios is edging back down to 3.75%-3.875%.

Loan Originator Perspective

"Much of the improvement with bonds has been due to stocks selling off, known as a flight to safety trade.   Today, both stocks and bonds are rallying which does have me optimistic that rates can hold onto the recent gains.   Despite my optimism, I think consumers that are within 30 days of closing should strongly consider locking in the recent gains.  The gains could disappear very quickly...and any further improvement will be slow." -Victor Burek, Churchill Mortgage

"Mortgage rates held up nicely today in the wake of an equity rally.  More surprising was a decent treasury auction which helped to boost bond pricing.  If the bond market rally continues we could see rates improve. Ont he other hand the longer we remain at the current overbought levels the harder bonds prices may fall causing rates to head higher.   Risk vs reward heavily favors locking." -Manny Gomes, Branch Manager, Norcom Mortgage

Today's Best-Execution Rates

  • 30YR FIXED - 3.875%
  • FHA/VA - 3.5%
  • 15 YEAR FIXED - 3.125-3.25%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • The Fed finally hiked on December 16th.  The baseline implication would be steady pressure toward higher interest rates, but there's been "a catch" so far in 2016
  • Global financial markets have come into the new year in distress.  Major stock indices are plummeting around the world, and investors are seeking shelter in the bond market.  When investor demand for bonds increases, rates fall.

  • So we're left with a move toward the lowest mortgage rates in 7 months despite the Fed having just begun its hiking cycle.  This paradoxical trend can continue as long as global risk markets continue selling-off.  The big risk is for a big bounce if global risk markets happen to find their footing. 

  • 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).