Mortgage rates were higher to end the day, but not as high as they might have been without the Fed Statement.  The day began with a series of strong economic reports.  The ADP Employment Report was much stronger than expected, as was the employment component of the ISM Manufacturing report.  Investors connect those dots to increased risk of a strong number in this Friday's all-important Employment Situation Report (the big jobs report).  

But jobs are good, right?  So why is this bad?  

It's not bad for the economy.  It's merely bad for rates.  In general, stronger economic data (especially when it's the jobs report) tends to push rates higher.  Bottom line: this morning's data made traders think Friday's big jobs report might be even stronger, so they traded bond markets toward higher rates preemptively.

The Fed helped push rates back in the other direction this afternoon.  While there were numerous minor changes in their verbiage, none of them did anything to accelerate the rate hike timeline or to threaten the Fed's current policy of reinvesting the interest it earns on its portfolio.  That's one of the key reasons that rates are still historically low. With that, multiple lenders were able to improve rate sheets this afternoon.  The net effect was still a slight move higher for closing costs, but the damage would have been much worse without the Fed.

Loan Originator Perspective

Following the FOMC, the bond markets have begun to rally.  Bonds opened up much weaker than yesterday resulting in lenders hammering rate sheets to the worse.   As of 3pm, a few lenders have repriced for the better.   At this point, I feel it is worth the risk to float overnight.  If you do wish to lock today, wait as late as possible to allow your lender time to issue a reprice for the better.  -Victor Burek, Churchill Mortgage

Pretty boring stuff recently. We saw a strong ADP employment number, a decent ISM number and MBS didn’t do much.  The Fed left rates alone and still MBS didn’t do much.   We’ve hovering in the middle of the range so motivation to do something is lacking for me.  If you like it lock it, otherwise let’s hope something (NFP) goes our way soon (Friday!).   -Jason B. Anker, Vice President- Loan Officer at Salem Five

Today's Best-Execution Rates

  • 30YR FIXED - 4.25%
  • FHA/VA - 3.75%
  • 15 YEAR FIXED - 3.375%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • Rates had been trending higher since hitting all-time lows in early July, and exploded higher following the presidential election
  • Some investors are increasingly worried/convinced that the decades-long trend toward lower rates has been permanently reversed, but such a conclusion would require YEARS to truly confirm

  • With the incoming administration's policies driving a large portion of upward rate momentum, mortgage rates will be hard-pressed to return to pre-election levels until well after Trump takes office.  Rates can move for other reasons, but it would take something big and unexpected for rates to get back to pre-election levels. 
  • We'd need to see a sustained push back toward lower rates (something that lasts more than 3 days) before anything less than a cautious, lock-biased approach makes sense for all but the most risk-tolerant borrowers. 
  • 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).