November 19, 2015
Mortgage rates moved nicely lower today, relative to the recent, plodding improvements. This brings most lenders back to their lowest levels since November 5th--the day before the jobs report pushed rates to their highest levels in more than 4 months. The most prevalently-quoted conventional 30yr fixed rate remains 4.0%, with quite a few lenders still quoting 4.125%. While today's quoted rates would be the same as yesterday's, most borrowers would see lower closing costs or a higher lender credit, depending on the scenario.
In the bigger picture, the financial markets that underlie mortgage rate movement are coming into the official holiday season. This is important because it decreases the liquidity in the secondary mortgage market (liquidity can be thought of as the level of activity in a marketplace--more to do with the availability of numerous buyers and sellers than the amount of dollars traded). Amid less liquid conditions, imbalances between buyers and sellers are amplified.
All this to say that there's a greater risk of volatility that arises for no overt reason over the next few weeks. The looming Fed meeting in mid-December means that investors are unlikely to move toward lower rates until they see what the Fed has to say. Or as the very least, there is more resistance than normal. This makes locking a safer bet in the near term.
Loan Originator Perspective
"A lot of smart people believe that even though the FED will be making moves in the immediate future, long term borrowing costs will remain suppressed for the foreseeable future. I am also in that camp, however the unfortunate truth is that nobody knows what will happen. What we do know is the market has been trading in a very tight range following the recent rise in rates and any days of improvements should be used as an opportunity. If you have time to wait it out, then you have a commodity that most people aren't privileged with. I am partial on floating all loans that have time value, but for anything closing within 15 days, maybe even 30, I think locking on days like today makes the most sense." -Constantine Floropoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.0%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2015 has been largely about rates rising unevenly from a long-term low brought about by the onset of quantitative easing in Europe. In May and June, the Fed increasingly began telegraphing a 2015 rate hike. At that point, the "rising rate environment" seemed like a sure thing, but the Fed's plans hit several snags. Economic data began deteriorating at home and abroad, causing markets to rethink the higher rate rhetoric. Mortgage rates hit 6 month lows at the end of October, just as the Fed surprisingly changed it's policy statement to specifically suggest December as a rate hike possibility (something they haven't done since 1999).
- In the bigger picture, rates had been at a crossroads, trying to determine if they would move back to 2015 highs or if the late summer swoon was merely the first wave of a longer campaign.
- While there is still plenty of room to be concerned about increasingly weak global economic growth, that's not a solid enough reason to float in this environment. With the Fed almost certainly on track for a December rate hike, there is much more risk that rates move quickly higher vs quickly lower. The big picture global malaise can serve as the basis for long term hope, but in the short term, assume upward pressure on rates when formulating your strategy.
- 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).