Mortgage rates rose by the smallest amount of the week today, but they rose nonetheless. That caps a streak of 5 straight days spent moving in an unfriendly direction. The caveat is that we continue to deal with an overall range that is generally very narrow. Between last week's lows and this week's highs, there's scarcely more than .125% in rate. And the biggest single-day movement (Wednesday) only saw an effective rate increase of 0.07%. Each of the remaining days was 0.03% or less.
That big move on Wednesday was due to comments from NY Fed President Dudley on the likelihood of a Fed rate hike in March. Markets have remained somewhat tuned in to Fed speakers since then, but even when Yellen today confirmed that a March hike was likely, there wasn't much of a response. Bottom line, financial markets are close to having fully "priced-in" a March rate hike.
That's both good and bad. The downside (a rapid move higher in rates this week) is out of the way. On a positive note, because markets are so sure the hike will happen, the upside is that there's a smaller list of things that could hurt us in the near future. Still, the list isn't empty. Next week brings the important jobs report on Friday and several economic reports throughout the week. Rates are near the upper limit of their recent range and there's still a risk they could attempt to break out of that range in the run up to the Fed meeting on March 15th.
Loan Originator Perspective
Bond markets sold off slightly today, as Chairwoman Yellen confirmed what Fed officials have been stating all week: economic conditions are strengthening, and Fed is likely to raise its overnight rate more than once this year. Fortunately, this news was already priced into markets, otherwise pricing would have suffered more. We're near the upper end of recent rate ranges, the $20 question is whether we bounce down or up from here. Given that rates are at the highest level since end of December, I'm playing defensively. Floating could yield better pricing, but only if our upward trend breaks. For now, I don't see that happening. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.25%
- FHA/VA - 3.75-4.25%
- 15 YEAR FIXED - 3.375-3.5%
- 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).