For the first time this year, mortgage rates spent the second straight day without moving any lower.  While that may sound like a bad thing, it should be noted that rates certainly haven't been in a hurry to move higher.  Yesterday was best described as 'unchanged,' and today's rate sheets were almost imperceptibly weaker.  In other words, we've spent the last few days bouncing along the lowest levels in more than 2 months.  Lenders are back to quoting conventional 30yr fixed rates in a range of 3.875% to 4.0%.

Still, the ebbing of the previously forceful trend might be cause for concern.  The current environment has surprised more than a few investors, and we have little to go on in terms of past precedent for how markets SHOULD behave when the Fed begins lifting its policy rate from a record amount of time spent at record lows.  Even if we knew how domestic markets should behave, overseas markets represent a wild card that can result in paradoxical movement in rates.

Loan Originator Perspective

"Rates hovered nearly unchanged today as stocks rallied.  "Not losing" in this case (given stocks' gains) is bond positive in my eyes, particularly since there was tepid demand for the 30 year treasury auction.  The $20 question seems to be when and how far global equity markets will continue to contract.  Until that's answered, hard to say where we go from here.  I am locking up loans within 30 days of closing, watchfully waiting on those further out for the moment." -Ted Rood, Senior Originator

"Today may be one of the few days so far this year the Stock Market may close up double digits.  Stocks did bounce off a floor of support and at these over sold levels may finally catch a break and that may come at the cost to mortgage bonds.  I would be locking in and take risk off the table." -Manny Gomes, Branch Manager, Norcom Mortgage

Today's Best-Execution Rates

  • 30YR FIXED - 3.875 - 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).