Mortgage rates moved higher today for the first time in nearly 2 weeks.  After rising slightly on Monday June 6th, rates have been on a mission--moving slowly and steadily to the lowest levels in well over 3 years.  Even after today's modest increase, rates are still at 3-year lows in terms of contract interest rates.  Today's effective rate (which factors in upfront costs/credits) is just a bit higher.  The most prevalently-quoted conventional 30yr fixed rate is 3.5% on top tier scenarios with only a few lenders on either side of that at 3.375% or 3.625%.  Keep in mind, of course, that the average loan isn't "top tier," which makes 3.625% a more prevalent rate overall. 

The question is whether or not rates will continue to operate near these ultra-low levels.  The last time we were in this territory, there was a sharp bounce back, although the conditions leading up to those lows were different than current market conditions.  We've also spent more time holding ground in the low range this time around.  Thus, there is some hope that we're establishing a new normal.  

The safest way to look at all this is to know that there will be periodic corrections toward higher rates even if the super long-term trends remain favorable (and they have for more than 3 decades).  When we have Fed speakers taking the podium and saying that the factors holding rates down "are not going to be rapidly disappearing, but will be part of the new normal," it only makes sense that we embrace that new normal in the bigger picture.  At the same time, knowing that rates MUST periodically move higher by varying times and distances, it also only makes sense to look for opportunities to lock when they arise.  Today is the first day in several weeks that has raised its hand to be considered as one of those opportunities.

Loan Originator Perspective

"I've been recommending locking 30-45 days out for the past few days as we are entering a range where we don't have any concrete data to support another leg down immediately.  Market was due for a breather, and today we are seeing it.  Question yet to be answered is if this is a pause before we test new lows or the beginning of resistance and a move to higher rates. Personally rates are so attractive here it doesn't make sense to guess the future. If you were brave enough to wait to this point now is the time to call it a day.  All that being said, I think we are yet to see the bottom for rates, but the question is how long until then. "  -Constantine Floropoulos, VP, The Federal Savings Bank

Today's Best-Execution Rates

  • 30YR FIXED - 3.5%
  • FHA/VA - 3.25%-3.5%
  • 15 YEAR FIXED - 2.75-2.875%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • Markets had been primarily concerned with the timing of the Fed's second rate hike (after they first hiked in December 2015)
  • The possibility that the U.K. would vote to exit the European Union (Brexit) has since taken over as the biggest flashpoint for markets. 

  • The Fed freely admits it didn't hike in June because of this and because it wants to be sure that jobs numbers aren't taking a bigger turn for the worse.  Mortgage rates moved farther into 3-year lows as a result.
  • If the UK votes to remain in the EU and if the next jobs report is strong, watch out.  Between now and then, volatility will be elevated and improvements in rates will be slow in coming (which is always the case when we're at long-term lows).  These have historically been good opportunities to lock, despite the longer term momentum remaining positive. 
  • 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).