December 2, 2015
Coming off their best day in over a month, mortgage rates held mostly steady today. Some lenders were just slightly higher. This is somewhat of an accomplishment considering the movement seen in underlying bond markets. Specifically, bond markets suggested a bigger move higher in rates today, based on the typical level of correlation. That said, it's not uncommon to see rates hold steady on days that follow the sorts of big moves lower we saw yesterday. The reason is simple: lenders simply didn't adjust rates lower at the pace that market movement suggested. As such, they had an extra cushion for today's weakness, which was largely intact by the time the first rate sheets of the day came out.
The average lender continues to quote 4.0% on top tier conventional 30yr fixed scenarios, but several lenders remain down at 3.875%
It was a safe bet that volatility would be increasing with this week's events. With today being the 2nd time we've seen relatively little change this week, it's fair to wonder if that volatility will show up. While there's no way to know for sure, the highest potential for volatility begins tomorrow morning and only increases heading into Friday's employment data.
Loan Originator Perspective
"Mortgage bonds gave up a majority of yesterdays gains. Even after equities began to sell off Mortgage bonds were not able to mount a rally. It appear to me traders are waiting for more data before deciding which way to go. I would be locking in anything closing this month." -Manny Gomes, Branch Manager Norcom Mortgage
"Rates rallied today, somewhat surprisingly, as bonds posted their largest gains in the past two months. Whether the motivation was tepid economic data or traders consolidating their positions, we'll gladly take the improvements, especially if they don't evaporate as fast as they appeared. Days like today make for a tough lock/float call. I'll lock some floating deals, especially those within 30 days of closing." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.875 - 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).