October 27, 2016
Mortgage Rates are much higher today, regardless of anything else you may have seen. Why am I alluding to other things you may have seen? Because it's Thursday--the day that Freddie Mac publishes its weekly mortgage rate survey, which is subsequently used as source material for most major media outlets. A barrage of similar headlines about any topic would tend to give the impression that something is true, but nothing could be further from the truth today.
Not only have rates not moved any lower this week, but today specifically, they're sharply higher. The discrepancy is a result of Freddie's methodology, which invites responses over the first 3 days of any given week, with a majority coming in by Tuesday. As such, the survey tends to compare Mon/Tue rates from this week to Mon/Tue rates last week. On weeks where little changes on Wed-Fri, that's no big deal, and over time, it will certainly capture the broad movement in mortgage rates.
But things have been changing rapidly on this particular Wednesday and Thursday. Moreover, last week's lowest rates were on Thursday and Friday. That means Freddie's week-over-week reference point was higher than it needed to be. Indeed, if we only look at the first 2 days of the week, I'd be the first to tell you that this week was better than last week.
Unfortunately, you no longer have access to rates from the first 2 days of this week (unless you're already locked). Since then, we're up quite a bit, with most lenders who WERE at 3.5% now up to 3.625% on top tier conventional 30yr fixed quotes. Today's rates are the highest in 5 months, and have risen .375% in the past 3 months.
Loan Originator Perspective
I suggest locking in interest rates at this time, as I believe this is the beginning of a 6-8 week rise in rates. You'll have some windows in that time frame where there is improvement, but 2 weeks from now I expect rates to be higher, 4 weeks from now I expect rates to be higher, 6 weeks...well, you get the picture. -Brent Borcherding, brentborcherding.com
Rough sell off today. The trend is not our friend has been the recent theme and that continues today. I would recommend locking in today. We do have some important data tomorrow, but I doubt it will be enough to change the trend. -Victor Burek, Churchill Mortgage
I've been preaching the need to lock early for several weeks, and today's bond market movement illustrates why. Both treasuries and MBS have broken resistance, the 10 year treasury yield blew past 1.81% and is currently at 1.85%. Floating borrowers need to discuss their strategy with their lender STAT, and anyone who is banking on the numbers of a quote they got last week is going to be solely disappointed. LOCKING is the prudent move, failing to do so virtually guarantees you'll see continued losses. -Ted Rood, Senior Originator
We are seeing constant upward moves in treasuries that confirm the recent upward trend is intact. At some point we do anticipate a reversal, but until then, the only thing to do is to lock your rate. Loans within a 45 day window must lock. Today's selling may be overdone, but it can snowball even worse, real fast. One thing we have learned over the years is that rate movements higher happen faster and aggressively, whereas moves lower typically take a bit more time. -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).