January 22, 2016
Mortgage rates moved higher at their quickest pace of 2016 today. Rates have been faithfully following the slide in equities prices, albeit at a gentler pace. With stocks capping their best 2 days of the year this afternoon, it's no surprise to see rates in tow. Even though it's the most abrupt move of the year, the outright levels remain close to 2-month lows. The average lender continues quoting conventional 30yr fixed rates near 3.875%. Today's weakness mean that the average outlying lender is at 4.0% instead of 3.75%.
In terms of strategy, this is the most threatening development we've seen so far this year. Of course, there's every possibility that markets are merely leveling-off ahead of next week's Fed Announcement, but there are just as many chances that we just saw a bounce that will mark a shift in the trend. Unfortunately, we may have to wait until Thursday to get real clarity on the bigger picture.
Loan Originator Perspective
"Rates continue to give back some of the recent gains. Since rate sheets came out this morning, Bonds are off their lows of the day which should allow some lenders to reprice for the better. It appears to me that lenders took away much more than the price drop justified this morning. And with today being Friday, they will probably be very conservative in passing along the improvements. At this point, I think it may be worth the risk to float over the weekend and see what Monday brings. As always, only float if you can afford to be wrong!" -Victor Burek, Churchill Mortgage
"2016 so far has been great for rates. Rates have now dropped by .25%-3.75% since January 1st. Normally when you see drops this large and this quick we tend to see rates hold steady or head higher in the near term. For this reason I will recommend locking into the weekend. " -Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.875%
- FHA/VA - 3.5%
- 15 YEAR FIXED - 3.125-3.25%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- The Fed finally hiked on December 16th. The baseline implication would be steady pressure toward higher interest rates, but there's been "a catch" so far in 2016
- Global financial markets have come into the new year in distress. Major stock indices are plummeting around the world, and investors are seeking shelter in the bond market. When investor demand for bonds increases, rates fall.
- So we're left with a move toward the lowest mortgage rates in 7 months despite the Fed having just begun its hiking cycle. This paradoxical trend can continue as long as global risk markets continue selling-off. The big risk is for a big bounce if global risk markets happen to find their footing.
- 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).