November 25, 2015
Mortgage rates broke from tradition today by maintaining an almost perfectly flat trajectory leading up to Thanksgiving. This time of year is typically marked by lighter participation among the trading community whose trades ultimately dictate mortgage rates. When fewer of them are about, volatility can increase in financial markets. In years past, it's been common to see a small imbalance among traders translate to a quick move in one direction or another for rates.
Perhaps there is more uncertainty and anxiety this year, resulting in market participants being less willing to bet too strongly for or against any particular rate movement. This would stand to reason with the Fed's first rate hike in 11 years seen as a near certainty just a few weeks from now. Whatever the case may be, mortgage rates have remained steady to slightly lower, with the most prevalently-quoted conventional 30yr fixed rate at 4.0%. Many lenders remain at 4.125%.
Banks and mortgage companies will be closed tomorrow for the Thanksgiving holiday. Participation varies on Friday, but the markets that underlie mortgage rate movement will be open until 2pm Eastern. That connotes some amount of risk as far as mortgage rate movement is concerned, but we won't see any important calendar events until the following week.
Loan Originator Perspective
"I've locked numerous loans during the last two days. I'm not particuarly concerned with leakage, but we hit rates/prices that my clients are happy to have achieved. We are entering a new world when the Fed's FOMC meets December 15th and 16th. On the 16th, at 2pm, the FOMC will let us know that they have increased the Federal Funds rate and by how much and probably give us some guidance on when the next rate hike will be. Traders will trade and try to predict the future, but the movement is priced in now. So, what will be the wild card to affect our mortgage rates then? We'll see." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
"Bond markets eased into Thanksgiving with little change, which is not surprising. There was some "bond unfriendly" economic data today (durable goods orders and new home sales), so rates holding their ground is at least a moral victory. My hunch is there won't be much movement in markets until Monday, barring serious international drama. I'll float new applications until then, to pick up the additional 5 days on lock expiration, if nothing else. Happy Thanksgiving, all." -Ted Rood, Senior Originator
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).