October 7, 2016
Mortgage Rates were modestly higher today, despite a weaker-than-expected Employment Situation (aka NFP, nonfarm payrolls, or simply "the jobs report"). NFP is the most important number on any given month in terms of market-moving economic data. When NFP is lower than expected, rates tend to move lower. Even though today's NFP didn't fall too terribly short of forecasts, rates nonetheless made a counterintuitive move higher, confirming the generally pessimistic attitude in the bond market at the moment.
The modest increase in rates means we continue to operate at the highest levels in more than 3 months. Most lenders than had been quoting 3.375% on conventional 30yr fixed scenarios are now up to 3.5%. Many have moved up from 3.5 to 3.625%.
While there are some early signs that a ceiling could be forming, it doesn't make much sense to float in this environment. That will continue to be the case until we see either a big push back toward lower rates, or an extended period (5-10 days at least) of stability at current levels.
Loan Originator Perspective
NFP was almost a non-event. Big question now is where do we go from here? December is not too far away (Fed rate hike expected), November is right around the corner (election, new President, new policy). I personally think we are hitting a ceiling on rates prior to either of the two major events anticipated, and we should trade within a tight range. That being said, I do not think rates will be improving much, barring an unforeseen major event, and advise locking all loans within a 30 day closing window. -Gus Floropoulos, VP, The Federal Savings Bank
You know rates are swimming against the tide when NFP (the jobs report) disappoints (as it did today) and loan pricing still worsens. As I mentioned earlier this week, the short term trend is not our friend now. It's wonderful that we haven't had any days with overwhelming spikes, but since September 27th, rates have increased roughly .25%. I'm still locking early, as I would hate to have an unlocked pipeline if/when the trickle to higher rates grows into a cascade. Hope everyone on east coast stays safe! -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.5-3.625%
- FHA/VA - 3.25%
- 15 YEAR FIXED - 2.75-2.875%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- In the biggest of pictures, "global growth concerns" remain the driving force behind the long-term trend toward lower rates
- Amid that trend, periodic corrections toward higher rates can and will happen. These can happen for no apparent reason, or they can be brought on by changes in expectations surrounding central bank policy at home and abroad, as well as geopolitical and systemic risks
- Time horizon and risk tolerance are 2 variables to consider when it comes to locking. If you have plenty of time and don't mind losing some ground, set a limit as to how much higher rates could go before you'd lock to avoid further losses, and then float in the hopes of never seeing that limit.
- In the shorter-term, it's always good to look for lock opportunities after rates have been moving lower or sideways repeatedly, especially if they've since begun to move back up in any sort of consistent way.
- 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).