November 22, 2016
Mortgage rates stayed mostly steady today, on average. For the record, that means some lenders were in slightly better shape versus yesterday's latest levels while others were in worse shape. This is always the case on days where rates remain unchanged on average, but the discrepancies can be larger than normal at the moment due to recent volatility.
With it being a shortened holiday week (bond markets closed on Thursday and only nominally open on Friday), tomorrow is essentially the last day with meaningful market participation. While it seems that rate volatility has died down significantly for now, the more recent an episode of major volatility, the more susceptible rates can be to aftershocks. It could easily be the case that we see no such aftershock, but it's still a bit soon to trust the recent rate ceiling and hope for improvements.
If we do see improvements, they'd likely be fairly contained for a few key reasons. Chief among these is the fact that the financial world must wait for one of two things before rates have a chance of major improvement. We'd either need to see some big shock or we'll simply have to wait for clarity on Trump's policy path. And we can't possibly get enough clarity about the policy path until Trump actually takes office.
For more on how and why the election affected mortgage rates, 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
The magnitude of recent bond market panic means the default game plan for new applications has been to lock for 45 days. It also means we could see a lull that allows risk-takers some room to strategize. Rates have already leveled off enough that I would consider taking my finger off the panic button if they can show me one more day of stability. From there, I'd want to see some improvement coming out of the holiday week when volume picks back up and especially into early December before getting too excited. As a proxy for mortgage-rate momentum, if 10yr Treasury yields were to break above 2.40%, I'd be reaching for the panic button again very quickly. -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).