December 10, 2015
Mortgage rates moved moderately higher today, bringing them to the worse levels in exactly one week. That said, the movement over that time has been minimal overall--not even enough to affect contract rates. In other words, you would likely have seen the same interest rate on any quote during the past 5 days. The changes in "rates" would instead be driven by the changes in the upfront costs. Taking these closing costs into consideration allows us to observe changes in mortgage cost on a smaller scale (sometimes referred to as "effective rate). The most prevalently-quoted conventional 30yr fixed rate remains 4.0%, though fewer lenders are quoting 3.875% today.
With next week's Fed Announcement being the biggest item on the near-term calendar, none of the recent economic data or events have been important enough to be of much concern. One of the only possible exceptions will be tomorrow morning's Retail Sales data. While it certainly won't deter the Fed from its likely hike next week (and while it may not even have much of an effect at all), it at least stands a chance to have some small impact on the short term path for mortgage rates.
Even then, the bigger picture is now more important than the short term path. With the Fed hike being a relatively foregone conclusion, investors are now turning their thoughts not only to the rate hike outlook for 2016, but to the general state of the economy both at home and abroad. Reports like Retail Sales can help shape that bigger picture outlook, and that can (and will) do just as much to inform mortgage rates as the volatility surround Fed policy. In other words, if Retail Sales are weak, mortgage rates can still improve even though the Fed is hiking next week.
Loan Originator Perspective
"The hoped for post supply rally didn't happen today. Rates continue to be range bound and the risk at this time is a break to higher yields. That said, I think it may be wise to lock in today. With the Fed decision on a rate hike in a week or so, I do not see anything that would cause rates to break through the current floor other than some new tapebomb such as a terror attack, increased QE in Europe, etc..." -Victor Burek, Churchill Mortgage
"Rates were largely unchanged today, as both treasury and MBS prices hovered in recent ranges. The Fed's looming overnight rate interest hike is priced into markets, and I see little motivation for rates to change dramatically up/down, given oil's continued bear market. It's tough for anyone to be concerned about inflation (which is bonds' archenemy) when oil is trading at multi-year lows. The lock/float decision in times like this boils down to "do we wait and hope your lender credit rises slightly (knowing full well it might drop instead), or do we lock and concentrate on packing?" I'm 50/50 lock/float now for new files, but only with the caveat that huge gains are highly unlikely." -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).