Mortgage rates fell for the third straight day today.  Each day has seen moderate improvement.  Taken together, they add up to a strong move lower from last week's levels (which were roughly in the lower-middle of the post-election range).  The result is that some lenders are at or near their lowest rates in nearly 3 MONTHS (yesterday it was 3 WEEKS).  The average lender has only had 3 days during that time where rates were any better.  

There are plenty of opinions about what's behind this week's falling rates ranging from politics to last week's jobs report causing a shift in Fed rate hike expectations.  All that matters is that investors have shifted to a more risk-averse stance resulting in better demand for less risky assets like bonds.  Higher demand for bonds means lower rates.

4.125% remains the most common conventional 30yr fixed quote for top tier scenarios.  There are now very few lenders still stuck up at 4.25% (keep in mind that we're talking about a perfect loan file with no negative adjustments for loan-to-value, FICO, etc..)

To reiterate yesterday's point, the more we dig into these longer-term lows and the longer we maintain a winning streak, the more likely we are to see a pull back in rates.  Risk-averse borrowers or those trying to time the markets should increasingly consider locking as rates move lower.  Risk tolerant borrowers can now afford to see if rates can hold at 4.125% and use 4.25% as a stop-loss.

Loan Originator Perspective

Yesterday I said I’d like to see this run continue to 2.33 and it did, we have an intra-day low of 2.3345.  Now what?  In the past 30 days we’ve not managed a close under 2.33, you need to go all the way back to late Nov. to find a 10 year yield under 2.33.  There is a good chance 2.33 will be our floor for a little while so this could be a very good locking opportunity.  If we manage to break 2.33 then I don’t see much support until we get to the 2.1’s so float on.  Longer term locks would probably do well to float and see how the 2.33 floor trade pans out.  I think reward outweighs current risk.  -Jason B. Anker, Vice President- Loan Officer at Salem Five

Today's Best-Execution Rates

  • 30YR FIXED - 4.125
  • 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).