Mortgage rates moved lower after this morning's Employment Situation Report, though not necessarily because of it.  After 2 days spent correcting from strong move lower in stock prices and bond yields, markets had had enough.  In other words, global financial markets moved one way from December 29th and then the other way on Wednesday and Thursday.  That left today as a bit of a wild card. 

Soon after the big jobs report, it became clear that stocks and bond yields (which are analogous to mortgage rates) weren't willing or able to go any higher.  The bounce back in the other direction was fueled by overseas headlines concerning the hostage situation in France.  European markets led US bond markets back toward lower rates into the noon hour.  When Europe closed, domestic markets were obviously done with that move, but didn't snap quickly back into weaker territory.  This allowed many mortgage lenders to drop rates in the early afternoon.

The improvements bring rates in line with those seen on Wednesday.  These weren't quite as good as Tuesday's, but apart from that, they're the lowest in the past 19 months.  3.75% is an easily quotable conforming 30yr fixed rate for most lenders dealing with a top tier scenario.  3.625% is available to a lesser extent.

Loan Originator Perspective

"Today's jobs report showed solid gains which typically is bad news for rates. However, when digging into the report month over month incomes declined with the prior month being revised lower. Janet Yellen and other fed members are quite concerned over the lack of income growth. Until income growth picks up, the Fed will likely hold off on increasing rates. Today, i favor floating all loans over the weekend to allow time for lenders to pass along today's improvements." -Victor Burek, Open Mortgage

"Rates rallied nicely today, as European angst more than offset January's jobs report. While we didn't regain the best recent pricing of Jan 6th, we at least regained yesterday's losses. There's still no clear indication whether this move downward will continue short term, so anyone happy with their current pricing may want to pull the trigger."-Ted Rood, Senior Loan Originator

"So far stocks have been playing seesaw this year with big up and down days. This trading action has been helping mortgage bonds as they tend to benefit when stocks go down or are unstable. Today's losses however may be attributed to the turmoil in France as a hostage situation unfolded. I pray this situation will be resolved quickly and the hostages return to their families unharmed. Should this situation be over by Monday and bonds maintain some of the recent gains we may be headed towards lower rates for the trend higher may continue. For now I would float and wait for Monday to make a decision but if your lender did re-price today and the rates are attractive locking in would make sense." -Manny Gomes, Branch Manager Norcom Mortgage

"Even for a Friday, it’s a good day to lock, in my opinion. With negotiation options available for cases where rates drop after locking, why take a chance in the event markets switch direction? Strong jobs reports with upward revisions to previous months often cause rates to rise, but global issues are carrying more weight for now, with the stock market helping as well." -Michael Owens, Vice President of Mortgage Lending, Guaranteed Rate

Today's Best-Execution Rates

  • 30YR FIXED - 3.625-3.75
  • FHA/VA - 3.25
  • 15 YEAR FIXED -  3.0-3.125
  • 5 YEAR ARMS -  3.0 - 3.50% depending on the lender

Ongoing Lock/Float Considerations

  • The hallmark of 2014 was a narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets punished that imbalance with a paradoxical move lower.  This continues to serve as a reminder that prevailing beliefs about where rates will go won't necessarily be correct simply because they're the most prevalent.

  • European bond yields trended constantly lower in 2014, thus playing a prominent role in keeping US rates lower than they otherwise might be.  Many feel that Europe will continue to slide until their central bank engages in US-style quantitative easing.  Some see this happening in early 2015.  In any event, we're looking for a turn in Europe, first and foremost, before worrying about the longer-term trend in bond markets being at serious risk of reversing.
  • Much of 2014 could be considered "sideways to slightly lower" in terms of mortgage rates.  All things considered, it actually has been a remarkably gentle drift lower.  Things became less gentle in mid October when rates briefly broke into the high 3's.  They came back for a more gradual, determined push into the 3's in December.  Some of the late-year strength was chalked up to an epic slump in oil prices.  This drags inflation expectations lower, which is a net-positive for interest rates, but it could be debated as to whether oil prices were a chicken or an egg in the global growth story.

  • 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, 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).