November 28, 2016
WARNING: this article's headline makes the overall mortgage rate situation sound much better than it actually is. While it is indeed a fact that today's rates are lower than the previous business day's rates by the widest margin since Brexit, caveats abound. First off, the Brexit move was more than twice as big. Today's move is only slightly better than a handful of other decent days over the past 5 months.
The post-Brexit move also occurred when rates were already fairly low. In fact, rates were near all-time lows already, and had been moving almost exclusively lower all year. In stark contrast, today's improvement comes on the heels of one of the sharpest moves higher in history. It's fairly normal to see a decent-sized correction after a huge spike higher.
Finally, there's the simple market dynamics surrounding the Thanksgiving holiday. Bond markets (which drive mortgage rates) are subject to increased potential volatility on Thanksgiving week. Because of this, mortgage lenders tend to play it safe and build some extra margin into rate sheets. In other words, lenders generally set rates higher than they otherwise would have on Wednesday and Friday (think "cushion"). As such, rates are benefiting not only because bond markets have improved, but also because lenders can remove the cushion.
Bottom line: it was a great individual day for rates, but we're still very much in the "new normal" range of conventional 30yr fixed rates between 4% and 4.25%.
Loan Originator Perspective
Bond markets gained some steam today, but failed to break below certain key levels. I wouldn't get excited about this unless we can pair a few more days to somewhat confirm the selling in bonds is overdone. Lots of potential market moving data this week, month end trading, and as always potential headlines from domestic and foreign central bankers that may shift rates in either direction, very quickly. For new applications, locking in for 45-60 days (due to upcoming holiday lag) is the play, for existing loans that were caught in the Trump-nado, floating into this rally is a fairly reasonable strategy. -Gus Floropoulos, VP, The Federal Savings Bank
Bond pricing improved slightly today, and my rate sheets reflected minimal gains. As of mid PM, a few lenders repriced better, with others likely to follow. It's still WAY too early to call an end to the post election bear bond market, but at least there may be hope for an end soon. There's plenty of data on tap this week, ending with November's NFP jobs report. I still favor locking sooner rather than later, unless you really enjoy gambling and have room to absorb higher costs/rates. -Ted Rood, Senior Originator
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 had been trending higher since hitting all-time lows in early July, and exploded higher following the presidential election
- Some investors are increasingly worried/convinced that the decades-long trend toward lower rates has been permanently reversed, but such a conclusion would require YEARS to truly confirm
- With the incoming administration's policies driving a large portion of upward rate momentum, mortgage rates will be hard-pressed to make significant improvements until after Trump takes office. Rates can move for other reasons, but it would take something big and unexpected for rates to move appreciably lower.
- We'd need to see a sustained push back toward lower rates (something that lasts more than 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).