Mortgage rates moved just a bit lower today, bringing them to their best levels in exactly 1 week.  Most borrowers will see little-to-no difference between yesterday and today's loan quotes with the exception, perhaps, of a modest reduction in upfront costs.  That means 4.25% remains intact as the most prevalent conventional 30yr fixed rate on top tier scenarios. 

Bond markets (and thus, rates) responded favorably today to a series of weaker economic reports.  In general, weaker economic data tends to help bonds and hurt stocks.  Some of the positivity was also motivated by the calendar as certain traders are required to hold a certain mix of bonds by the end of any given month.  In other words, some investors were buying bonds because they wanted to and other were buying because they had to.

From here, the potential for volatility increases as data and events get even more serious through the end of the week.  There are several important reports tomorrow as well as an updated policy statement from the Fed.  Although there's essentially no chance that the Fed will hike rates at this meeting, investors will nonetheless look for clues about the Fed's thinking based on subtle changes in the text of the statement.

Loan Originator Perspective

Nice little rally this morning is giving us a chance in breaking into the lower part of the range.  We've recently been teased with moves like today to only watch it all disappear in the next day or so.  With some important data rolling out tomorrow and a key Fed announcement later in the day, we can hope for the best, but remain defensive in protecting what's available to us now.  There is a possibility that tomorrow's data, the Fed announcement, followed by Fridays employment report to create enough momentum to get us to a lower level on rates, but just as likely the opposite may occur.  Take what you can get and keep moving forward.  Lock em up.   -Gus Floropoulos, VP, The Federal Savings Bank

If you’ve been listen to me lately, you’re welcome.  We broke 2.45 today and are holding just under at 2.44.  If you did float then you can probably afford to take a bit more risk since you’re ahead of the game.  2.45 is still the threshold I’m watching and I would probably be a locker if we moved over that number.  More data on tap for tomorrow, if it comes in as weak as today’s then rates should improve.  I’m going to ride this wave a bit longer I think.  -Jason B. Anker, Vice President- Loan Officer at Salem Five

Bonds rallied moderately today, but still remained within our recent ranges.  This market seems reluctant to commit to either higher/lower rates at this point.  Floating might net risk-tolerant borrowers some pricing gains, the only caveat is that losses may be just as likely.  My pipeline is virtually all locked, I need to see more of a trend towards lower rates before I sail my float boat.  -Ted Rood, Senior Originator

Today's Best-Execution Rates

  • 30YR FIXED - 4.25%
  • FHA/VA - 3.75%
  • 15 YEAR FIXED - 3.375%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • Rates had been trending higher since hitting all-time lows in early July, and exploded higher following the presidential election
  • Some investors are increasingly worried/convinced that the decades-long trend toward lower rates has been permanently reversed, but such a conclusion would require YEARS to truly confirm

  • With the incoming administration's policies driving a large portion of upward rate momentum, mortgage rates will be hard-pressed to return to pre-election levels until well after Trump takes office.  Rates can move for other reasons, but it would take something big and unexpected for rates to get back to pre-election levels. 
  • We'd need to see a sustained push back toward lower rates (something that lasts more than 3 days) before anything less than a cautious, lock-biased approach makes sense for all but the most risk-tolerant borrowers. 
  • 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).