February 26, 2016
Mortgage rates moved higher again today--this time at a slightly quicker pace--bringing averages up to the highest levels in at least a week. That said, the recent rate range has been fairly narrow in the bigger picture. In extreme cases, there is a quarter point gap between today's rates and the lowest of the month (Feb 11th), which were only available for 1 or 2 days depending on the lender. Everything else has taken place in a 0.125% range.
In fact, the range is even smaller in terms of "effective rates," which take closing costs into consideration. We only get up to the 0.125% range because rates are typically offered in 0.125% increments. Long story short, 3.625% has been the most prevalent conventional 30yr fixed rate all week for top tier scenarios. It just costs a bit more today in terms of upfront costs (or conversely, allows for less lender credit).
Despite the narrow range, the biggest questions are always about the future when it comes to mortgage rates. It's very easy to discuss the fact that we're just over a quarter point away from all-time lows and that rates edged up this week. If those factoids make you feel like locking, go with that instinct. It's much harder to say whether rates will continue to head higher and at what sort of pace. One thing is for sure: we are definitely no longer in the same sort of trend that existed from December 31st through February 11th. During that time, rates never went higher for more than 2 days in a row, and they never ended a week higher than the previous week.
In fact, today is the first Friday of the year where rates are higher than the previous Friday. That's ominous at first glance, but we certainly haven't seen enough upward momentum to conclude that a new trend toward higher rates is beginning. For now, the fairest characterization is to say rates have been generally sideways just above the lowest levels in more than 2 years. Sometimes financial markets move this way to catch their breath before continuing in the same direction and other times it's the beginning of the end.
Loan Originator Perspective
"Due to the weakness this morning when lenders issued rate sheets, I think it is worth the risk to float over the weekend. Since rate sheets have been issued, MBS have regained some of the losses. Plus, I am not a fan of locking on a Friday, especially when the early morning trend was weakness in bond prices." -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.625
- FHA/VA - 3.25-3.5%
- 15 YEAR FIXED - 3.00
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- The Fed finally hiked on December 16th, causing fears of rising rates in 2016.
- But global financial markets came into the new year in distress. Now markets aren't even convinced that we'll see another Fed rate hike in 2016. Major stock indices plummeted around the world, and investors sought shelter in the bond market. When investor demand for bonds increases, rates fall.
- So we're left with much lower mortgage rates despite the Fed having just begun its hiking cycle. This paradoxical trend can continue as long as global market turmoil fuels a demand for safer haven investments. A big bounce in oil/stock prices could mean trouble for rates--at least temporarily.
- 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).