December 24, 2015
Almost any article you see today on mortgage rates will say the same thing: "rates are roughly unchanged from last week." Almost every article would be wrong, or at the very least, misleading. It is, by no means, the intention of those articles to mislead you, it's the unfortunate byproduct of the methodology behind the industry's most prevalent weekly mortgage rate tally.
Freddie Mac puts out a report on Thursdays that compares this week's rates versus the previous week. The survey period runs from Monday through Wednesday. Most of the responses come in on the first two days, meaning the data is heavily skewed toward whatever rates were on those days. Problems arise when big changes happen on the last 3 days of the week--ESPECIALLY if Monday and Tuesday were also outliers in the previous week.
That's the case today. Last week's survey was skewed toward higher rates in the early part of the week. This set a higher baseline against which to compare this week's rates. Given that Monday and Tuesday were the best days of the week, we managed to see the relatively flat performance when comparing them to the same 2 days last week (assuming we stopped paying attention after Tuesday).
Of course things changed yesterday, with a fairly big move to the highest rates in 5 months. Rates didn't move any higher today (a few lenders scraped together modest improvements), but week-over-week, they're appreciably higher. "Appreciable" for our purposes is anything that affects the actual contract interest rate. The average day to day movement only happens at the "closing cost" level, while contract or "NOTE" rates remain unchanged. Contract rates rose an eighth of a point from last week, bringing the range up to 4.125%-4.25% from 4.0%-4.125%
Loan Originator Perspective
"Not a fan of locking today. Today is a short trading day ahead of a 3 day weekend. Lenders tend to be quite conservative ahead of long holiday weekends. Plus, next week is month, quarter and year end which tends to be supportive for bonds." -Victor Burek, Churchill Mortgage
"Mortgage rates improved slightly today after running up this week. Next week the trading desks will be very lightly staffed which can create larger than normal movements for bonds. After heading into the higher end of the recent range for rates I'm in the floating camp over this long weekend. However if you are happy with your rate locking is not a bad idea " -Manny Gomes, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.125-4.25%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25-3.375%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2015 has been largely about global interest rates rising unevenly from a long-term low brought about by the onset of quantitative easing in Europe. European rates are most directly affected, but rates in the US have often taken cues for similar movement.
- As the European rate rally fizzled out, the Fed began telegraphing its intent to hike rates. While the Fed rate doesn't directly affect mortgages, the two are still loosely connected over time. They become more disconnected when the economy begins to contract. This helps longer term rates like mortgages move lower even while the Fed rate his steady or rising.
- The Fed finally hiked on December 16th, but there was no immediate reaction in mortgage rates. Some think that an economic contraction might not be too far away. Others are concerned about a lack of inflation (which is good for longer term rates like mortgages). Bottom line: the Fed rate hike has not been the death knell for low mortgage rates that many feared it would be, although the near term range is uncertain and rates could be more volatile than normal as we wait for a new trend to emerge.
- 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).