Mortgage rates bounced slightly higher today, ending a 4-day winning streak that began with last Wednesday's Fed rate hike.  Generally speaking, the bond markets that underlie mortgage rate movement were prepared for more volatility and have been able to lower those defenses (i.e. move back down in rate) after the reaction to the Fed rate hike proved to be fairly orderly.  That's not the only reason for the divergence between mortgage rates and the Fed Funds rate, but it's probably the biggest reason and certainly the easiest to understand. 

Today's move wasn't extreme in terms of ground covered.  The average lender is back in line with rate sheet offerings from late last week.  For most, that means no change in the actual interest rate being quoted--just a moderate increase in the upfront closing costs (or decrease in lender credit).  The most prevalently-quoted conventional 30yr fixed rates are 4.0 and 4.125% on top tier scenarios, depending on the lender.

Loan Originator Perspective

"With holiday mode in full swing, there isn't much to be gained by floating.   It will take some significant news for rates to rally going into next year.   I would think it is wise to look at locking if you are within 30 days of closing.   I would float if my closing was happening in more than 30 days."-Victor Burek, Churchill Mortgage

Today's Best-Execution Rates

  • 30YR FIXED - 4.0-4.125%
  • FHA/VA - 3.75%
  • 15 YEAR FIXED - 3.25-3.375%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • 2015 has been largely about global interest rates rising unevenly from a long-term low brought about by the onset of quantitative easing in Europe.  European rates are most directly affected, but rates in the US have often taken cues for similar movement. 
  • As the European rate rally fizzled out, the Fed began telegraphing its intent to hike rates.  While the Fed rate doesn't directly affect mortgages, the two are still loosely connected over time.  They become more disconnected when the economy begins to contract.  This helps longer term rates like mortgages move lower even while the Fed rate his steady or rising.

  • The Fed finally hiked on December 16th, but there was no immediate reaction in mortgage rates.  Some think that an economic contraction might not be too far away.  Others are concerned about a lack of inflation (which is good for longer term rates like mortgages).  Bottom line: the Fed rate hike has not been the death knell for low mortgage rates that many feared it would be, although the near term range is uncertain and rates could be more volatile than normal as we wait for a new trend 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).