Mortgage rates moved respectably lower today, nearly making it to the best levels in a month.  Whereas the average conventional 30yr fixed quote had been creeping up toward 4.25% at the end of December, we're now easily back to 4.0% for most lenders.  It should be noted that there continues to be more variation between lender quotes during this time of year, but we are seeing signs that things are getting back to normal as business picks up after the holidays.

Today's improvement is all the more impressive considering the fact that this morning's employment data from ADP was much stronger than expected.  ADP is one of the leading forward indicators for Friday's big jobs report.  Typically, a stronger than expected result is bad news for mortgage rates.  Today, however, rates weathered the storm quite well.  In fact, many lenders repriced to even lower rates due to bond market improvements in the afternoon.  It's possible that lenders and market participants alike were more cautious ahead of today's Fed meeting minutes.   As it happened, the Minutes weren't the slightest bit interesting.

Loan Originator Perspective

"ADP's December employment projection was released today, and despite it surpassing expectations, pricing rallied about 25 bps on continued overseas market angst.  Make no mistake, we aren't breaking any new ground here yet, just continuing to slide up/down through our recent range.  It's too early to call the improvement a trend, but I'm all in favor of it continuing.  I'll still take a conservative approach on locking, rather be wrong and locked than wrong and NOT locked." -Ted Rood, Senior Originator

"China worries and falling oil prices over come a much better than expected ADP employment report helping rates to stage a small rally today.   I do fear this might be short lived since we have non farm payrolls hitting on Friday.   I think it would be wise to look at locking in today if you are within 30 days of closing." -Victor Burek, Churchill Mortgage

"Rates seem to be benefiting from a rough start to the year for the Stock Market and further declines in Oil prices.  With the Fed moving in the direction of higher rates I think we'll need a stronger impetus to push rates even lower in the near term.  We may get that, but I would be cautious and tend to lock in these gains for now." -Hugh W. Page, Mortgage Banker, Seacoast Bank

Today's Best-Execution Rates

• 30YR FIXED - 4.00%
  
• FHA/VA - 3.75%
  
• 15 YEAR FIXED - 3.25%
  
• 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

• In 2015 global interest rates rose unevenly from a long-term lows brought about by the onset of quantitative easing in Europe.  European rates moved most (first lower, then higher), but rates in the US, including mortgage rates, are always taking some of their guidance from the global picture.
  

• Just as European rates were bouncing at all-time lows, the Fed began talking up its plans to hike its policy rate (Fed Funds Rate).  While the Fed rate doesn't directly affect mortgages, the two are generally connected in the long run.  They become more disconnected when the economy begins to contract (because Fed policy is slower to respond to changes in the economy).
  
  
• The Fed finally hiked on December 16th.  This implies a constant underlying pressure toward higher interest rates--as long as the economy doesn't begin to contract.  Opinions vary greatly as to when we'll see the early signs of the next economic contraction.  Some would argue we're already seeing them.  This, along with persistently low inflation, has helped rates avoid taking a big hit from the Fed rate hike, though we're still waiting for the first major trend of 2016 to emerge
  
  
• 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).