Mortgage rates moved higher for the 4th straight day today, following Fed Chair Janet Yellen's congressional testimony.  It wasn't that Yellen's speech or Q&A contained any major surprises.  Rather, bond markets (which dictate rates) were simply looking for some indication of "sooner vs later" with respect to the Fed's next rate hike.  Her comments were generally more in line with "sooner."  Bond markets responded by quickly trading rates to higher levels, resulting in multiple "negative reprices" for mortgage lenders this morning.

Bonds calmed down in the afternoon, and ended up clawing back roughly half of the morning's losses by the end of the day.  Many lenders were consequently able to offer "positive reprices"--bringing rate sheets part of the way back to yesterday's levels.  

Despite the afternoon improvements, essentially every lender is in worse shape today vs yesterday.  The average top tier conventional 30yr fixed quote is back up to 4.25%--a move that was already in-progress yesterday.  Today's rates are the highest since February 3rd.

Loan Originator Perspective

Chairwoman Yellen's congressional testimony today confirmed the Fed's previously stated goal of winding down fiscal stimulus, including investing in mortgage backed securities.  While the news was hardly a surprise, it did prompt some large movement in bond markets.  As of press time, 15 lenders reported worsening their rates mid-day, while 5 improved theirs as markets recovered.  We're now near the recent range's top, with treasuries just under 2.5%.  After all the excitement, markets are still looking for motivation, and haven't found it yet.  Floating short term MIGHT result in improved pricing, since we're at top of the range, with the emphasis on "MIGHT".  -Ted Rood, Senior Originator

Today's Best-Execution Rates

  • 30YR FIXED - 4.125-4.25%
  • 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).