October 26, 2016
Mortgage Rates didn't move much today, with most lenders just slightly higher than yesterday. This keeps us right in line with the highest levels in more than 4 months. For the sake of perspective, outside the past 4 months, rates have hardly ever been as LOW as they are today. The average lender is quoting conventional 30yr fixed rates of 3.625% on top tier scenarios, though several remain at 3.5%.
The bond markets that underlie rate movement are generally defensive and uncertain at the moment. Investors are anxious to see if next week's Fed announcement will hold clues about the Fed's intention to hike its policy rate in early December. Even though the Fed Funds Rate doesn't directly affect mortgage rates, if investors increasingly believe the Fed will hike in the future, mortgage rates tend to move higher in the present.
That's one of the key reasons that rates have been rising over the past few months. The other major consideration concerns the Fed's largest counterpart, the European Central Bank (ECB). Investors are anxious to find out if the ECB plans to begin reducing the amount of bonds it's buying each month. That bond buying is a driving force behind low rates around the world. There are rumors on both sides of the debate, but officially, all we know is that we're waiting until early December to get the ECB's thoughts.
Between the ECB and Fed, there's a massive amount of uncertainty that can't possibly be cleared up for more than a month. If anything is going to inspire rates to make big moves before then, it would have to make a very strong case. As far as strategy is concerned with respect to mortgage rates, it makes more sense to be defensive (i.e. favoring locking vs floating) until and unless rates can stage a big enough comeback to call the recent uptrend into question.
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).