November 24, 2015
Mortgage rates held steady today on average, with a few lenders improving almost imperceptibly. The most prevalently-quoted conventional 30yr fixed rate remains 4.0% with more than a few lenders still up at 4.125%.
If this week is to end up being anything like Thanksgiving weeks of the past, it has a lot of catching up to do, and a very small window of time to do it. The bond markets that underlie mortgage rate movement tend to see a quick move in either direction over the first 3 days of the week and a bounce back from that move by the following week. This time around, markets have been almost completely silent. If we don't see the characteristic holiday volatility tomorrow or Friday (markets are closed on Thursday), it will set the stage for even greater anticipation heading into December's market moving events.
The conclusion is very much in line with the default holiday lock/float strategy. Until we see how December's big events play out (the jobs report early in the month and the Fed meeting mid-month), the risk of a quick move higher in rates is bigger than the reward that could be realized by floating.
Loan Originator Perspective
"Bonds have managed to hold onto most of the recent gains. The rate sheets I am seeing today are slightly improved from yesterday. I do not see much benefit with floating, but I also do not see much risk right now. If you are within 15 days of closing and funding, I think pulling the trigger today may the wise move. With the holiday approaching, I think many lenders may pull back on pricing tomorrow regardless of what is happening in the markets." -Victor Burek, Churchill Mortgage
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).