Mortgage rates kept moving lower today as global financial markets remain in distress.  This time around, the improvement wasn't as much about the bond market gains as it was about lenders getting caught up with yesterday's gains.  As we discussed yesterday, when it comes to adjusting rate sheets to match trading levels in financial markets (which is the core of mortgage rate pricing), lenders have a hard time keeping up with major volatility.  As such, rates were able to improve today even though stocks and bonds were mostly sideways.

The other thing to consider is the implication of being sideways at current levels.  Bond yields and stock prices fell to the lowest level of the year yesterday and then didn't even try to bounce higher today.  There are complicated words to describe what this means for market participants, but the thesis is that it's a form of acceptance of the move that just happened.  

Given the timing, it would seem that financial markets are eager to hear from Fed Chair Janet Yellen, who delivers her semi-annual congressional testimony over the next 2 days.  If she happens to say something that inspires rates and stocks to move higher tomorrow, there will be very limited opportunity to lock before lenders raise rates.  The average lender is currently quoting conventional 30yr fixed rates of 3.625% on top tier scenarios, with the 'runner-up' slot quickly shifting toward 3.5% from 3.75% yesterday.

Loan Originator Perspective

"Amazing as it is, rates continued marching lower today.  I'm seeing pricing almost on par with January 2015's, and that rally only lasted days before fading.  It appears commodities, equities, and bonds all expect a global economic downturn, and that may become a self-fulfilling prophecy.  It's time for borrowers with rates in the 4's to take a hard look at their loans, and buyers waiting for low rates to shop need to get going pronto.  I don't know how long this rally will last, better get it while the getting is good!" -Ted Rood, Senior Originator

Today's Best-Execution Rates

  • 30YR FIXED - 3.625 
  • FHA/VA - 3.5%
  • 15 YEAR FIXED - 3.125
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • The Fed finally hiked on December 16th, causing fears of rising rates in 2016.
  • But  global financial markets came into the new year in distress.  Now markets aren't even convinced that we'll see another Fed rate hike in 2016.  Major stock indices plummeted around the world, and investors sought shelter in the bond market.  When investor demand for bonds increases, rates fall.

  • So we're left with much lower mortgage rates despite the Fed having just begun its hiking cycle.  This paradoxical trend can continue as long as global market turmoil fuels a demand for safer haven investments.  A big bounce in oil/stock prices could mean trouble for rates--at least temporarily.

  • 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).