Mortgage rates generally held their ground today. In fact, rates were lower than yesterday's, on average, but quite a few lenders raised rates from their morning levels. This was in response to sharp mid-day market movements that saw stocks, oil prices, and bond yields all move higher. While there are notable historical exceptions, bond yields tend to move higher when stocks are moving higher--especially when compared over a few hours instead of longer time horizons.
Stocks moved higher in a big way today, and bond markets definitely followed. That means bond yields moved higher and bond prices moved lower. Mortgage-backed-securities (MBS) are the bonds that most directly affect mortgage rates, and they were not immune to the weakness. When MBS prices fall enough, lenders can change rates during the day. Many lenders did, in fact, raise rates, but because the early morning levels were strong, the net effect is actually positive compared to yesterday.
3.625% remains 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
"Bond markets opened strongly today, improving rates, but the rally faded by mid PM. Overall, my pricing is slightly better than yesterday's. The IMF released some dovish (bond friendly) statements this PM. If economic conditions continue to wane, rates will improve, over time. For now, I am still locking most clients within 30 days of close, floating those who understand mortgage (just like gasoline) prices can go up or down!" -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).