November 18, 2016
It was all pain, all the time for mortgage rates today. Since the election, the average conventional 30yr fixed rate has risen roughly 0.5%, putting November 2016 on a short list of 4 worst months in more than a decade. Two of those months were back to back amid the 2013 taper tantrum and the other was at the end of 2010. Let it be known that the recent surge in rates is more than a mere post-election knee-jerk. Financial markets are fully repricing their expectations of the future, and we can't even begin to assess how that future might actually pan out until Trump takes office.
In other words, buckle up for a higher mortgage rate environment. Rates won't necessarily be immune from good days over the next few months, but I certainly wouldn't expect a quick, triumphant return to the promised land (rates from 2 weeks ago, and below) within the same time frame. The most prevalent conventional 30yr fixed rate quote is now 4.125% on top tier scenarios, and more than a few lenders are already up to 4.25%.
If you're just getting caught up with the massive mortgage rate drama of the past week, here are the relevant recaps:
(11/9/2016) Worst Day For Mortgage Rates in Over 3 Years
(11/10/2016) Mortgage Rate Pain on Par With Taper Tantrum
(11/14/2016) Mortgage Rates Skyrocket to 4%. New Normal?
Loan Originator Perspective
Another day, another set of multiple price worsen alerts. Bonds' free fall continued today, and there's little evidence it will end soon. This might sound familiar, but bears repeating. THE TREND IS NOT OUR FRIEND, floating is a high risk, low reward proposition. -Ted Rood, Senior Originator
Bond markets have crossed specific thresholds that we were hoping would serve as resistance. This causes major concern for loans not locked prior to the Trump effect in mortgage rates. Is it time to abandon the float boat? Is it time to eat the loss? It very well may be. The momentum is overwhelmingly against lower rates for now, and until that changes, rates are poised to continue to rise. 2.32 on the 10 YR treasury was my absolute max ceiling on floating, that has clearly not held up, and it looks like we will be closing above this pivot point. The bears win this round. -Gus Floropoulos, VP, The Federal Savings Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.125%
- FHA/VA - 3.75-4.0%
- 15 YEAR FIXED - 3.375%
- 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, and exploded higher following the presidential election
- Clearly-defined uptrends provide higher-than-average motivation to lock, especially when the pace of rising rates accelerates quickly
- 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).