Mortgage rates experienced some volatility today, but ended up in slightly stronger territory on average. At first, rates were higher, as underlying bond markets were quickly weakening in the morning hours (weakness in bond markets translates to higher interest rates). But bonds staged an impressive comeback with help from weak consumer confidence data and falling oil prices. Weak economic data tends to benefit bond markets.
When bond markets move enough during the day, lenders often 'reprice' for better or worse. This simply means that the lender is no longer accepting locks at the previous rates. Most lenders send out a new rate sheet at the same time. Thus mortgage rates have 'repriced.'
Almost every lender repriced for the better by the afternoon, bringing today's average borrowing costs just below yesterday's. Keep in mind, we're not seeing enough movement to affect the contract interest rate itself. Instead, it's the upfront costs that moved microscopically lower. For days now, 3.625% has been the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios. A few of the more aggressive lenders are quoting 3.5% while a few others are still up at 3.75%.
Loan Originator Perspective
"Since we opened up much weaker this morning, I think floating is definitely the way to go. Many lenders have improved pricing from the first rate sheets as bonds have regained all the morning losses and some. Any time we rally, lenders tend to be slow in passing along the gains as they wait to see if they hold." -Victor Burek, Churchill Mortgage
"Bonds overcame morning weakness today, and numerous lenders improved their rates as the day progressed. Consumer confidence data failed to meet expectations, which could imply future reduced spending/low inflation. I don't know when our current rally will ebb, but with pricing nearly the best since Jan 2015, I'm locking loans within 30 days of closing. Our last January rally only lasted a week at peak levels, why not get while the getting is good?" -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.625
- FHA/VA - 3.25-3.5%
- 15 YEAR FIXED - 3.00
- 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).