Mortgage rates spiked, big-time, today. Underlying bond markets had already moved higher in rate overnight, but the trend was taken to a new level by an exceptionally strong employment report from ADP. Although this isn't the big jobs report (we'll get that on Friday), many market participants treat the ADP numbers as one of several advance indicators of Friday's jobs report. Sometimes it doesn't register a response, but when it beats the forecast by as much as it did today (298k vs 190k), markets can't help but adjust their trajectory ahead of Friday.
The net effect was the sharpest move higher in rates in several months, slightly outpacing last Wednesday's rout. Moreover, with the exception of a modest improvement on Monday, rates have moved higher every single day since February 27th. In just over a week, the average conventional 30yr fixed quote is up approximately a quarter of a percent for most lenders. Stronger lenders are offering 4.25% on top tier scenarios while many moved up to 4.375% with today's weakness.
Loan Originator Perspective
ADP's projection for February job growth blew away expectations, possibly setting the table for a blockbuster NFP report Friday. Mortgage rates rose (again) on the heels of this bullish economic news, and the recent upward rate trend continues. I see limited incentive to float here, have some clients who've lost .375% in rate while looking for houses, and that's never fun. The trend is NOT our friend. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.25-4.375%
- FHA/VA - 4.0-4.25%
- 15 YEAR FIXED - 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).