October 14, 2016
Mortgage Rates remained under pressure today, moving right back to the highest levels in more than 4 months after only one day of recovery. This might not have been readily apparent on most of the day's rate quotes because things didn't deteriorate meaningfully until late in the afternoon. In fact, for several lenders, it was too late in the day to issue a reprice (i.e. a new rate sheet on any given day, typically prompted by big moves in bond markets). When that happens, those lenders simply adjust for the market movement on Monday morning.
In quantitative terms, even after lenders made their adjustments, rates aren't too much higher than they were on Wednesday. Conventional 30yr fixed quotes are still going out around 3.625% on top tier scenarios. The only changes would be seen in the form of slightly higher upfront costs.
The problem is that any incremental weakness means we're simply pushing deeper into 4 month highs. These sorts of clearly-defined uptrends provide higher-than-normal motivation to favor locking vs floating. Indeed, the reward for successfully timing a lock is quite low at the moment. Lenders won't be quick to improve their pricing until they see a more sustained bounce back toward lower rates in the bond market.
Today's Best-Execution Rates
- 30YR FIXED - 3.625%
- FHA/VA - 3.25-3.5%
- 15 YEAR FIXED - 2.875%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Rates have generally been trending higher since hitting all-time lows in early July
- Clearly-defined uptrends provide higher-than-average motivation to lock
- Risk-takers can try to time the dips in rates that may occur during that broader uptrend, but the reward for good timing generally isn't worth the risk in these situations.
- We'd need to see a sustained push back toward lower rates (something that lasts more than 1-3 days) before anything less than a cautious, lock-biased approach makes sense for all but the most risk-tolerant borrowers.
- 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).