October 19, 2016
Mortgage Rates were steady to slightly lower today, which keeps them fairly close to 4-month highs. 3.625% continues to be the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios, but some of the more aggressive lenders are still at 3.5%.
After rising sharply in the first half of the month, rates have leveled-off this week. This could be happening for several reasons. On the most basic level, rates (or any financial instrument for that matter) tend to take periodic breaks during broader directional trends. In other words, if rates are rising consistently, in general, we might expect to see a few days where rates are sideways to slightly lower every now and then. It's part of the natural ebb and flow of market movement.
Rates could also be pausing in anticipation of tomorrow's potentially important announcement from the European Central Bank (ECB). Even though US mortgage rates are most directly influence by US mortgage-backed securities, global bond market volatility is only a few degrees of separation away. Because any surprises from the ECB can easily cause big moves in global bond markets, US mortgage rates would certainly feel it. At the moment, the concern is that the ECB will confirm recent rumors that its close to announcing some sort of reduction in the pace of its asset purchases (which are a big part of the low rate environment in general).
The ECB may or may not address the topic at this meeting, but if they do, rates are at risk of sharper movement, for better or worse.
Charts are telling a tale of an uptrend in rates that is poised to continue. Until we see something to disrupt this trend the intelligent decision is to lock in. We are in the final stage of the presidential race, the final stretch toward the Fed's decision to potentially hike rates in December, and poised to find out if Europe is headed toward a taper tantrum. Until these major milestones pass, I think most bond traders will be hesitant to get behind to a strong move to lower rates. Their outlook is defensive. Ours should be too. -Gus Floropoulos, VP, The Federal Savings Bank
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).