November 29, 2016
Mortgage rates continued lower today. While the pace of improvement was slightly slower, it was enough to get the average lender rate sheet back to levels seen last Tuesday. That makes this the first time since before the election that rates haven't been significantly higher week-over-week. It's also the first time in more than a month where rates have moved lower 2 days in a row. Normally, such accomplishments would be no big deal, but when we're backing down from the highest rates in more than a year, every little bit helps.
Today's improvements translated to a little more unity among lenders. Whereas more than a few were still quoting conventional 30yr fixed rates of 4.25% on top tier scenarios yesterday, most are now back down to the 4.0%-4.125% range. From a strategy standpoint, there are 2 ways to approach the current environment. On one hand, you could count yourself lucky to finally be seeing a week-over-week improvement and lock accordingly.
On the other hand, this could be viewed as the first evidence that rates are topping out in the recent range and thus consider waiting for more potential improvement. Waiting is risky, of course, and requires that you set a stop-loss rate--perhaps an eighth of a point higher from your current quote--where you'd resign to lock at a loss if markets move against you.
Loan Originator Perspective
Bonds and MBS fared well through the day reversing the early weakness and gaining back the early losses, but failed to break below certain key levels. As long as we are trading within the current area the concern is we are simply consolidating before the next move higher...or lower. The trend has been against us, and even though we've managed to pair a couple of days of relatively positive movement in rates, we have failed to truly buck the trend. What's promising is that today's trading digested some bullish economic data (bad for rates) and decided it wasn't enough to push rates higher, at least for today. For all new applications, locking immediately for 45-60 days is the recommendation. For loans that did not lock prior to the Trump-effect on rates, you can carefully float here, acknowledging that we need a large shift in sentiment to get even close to where we were in early November. Lots of big market moving data to end the week, month end trading, and as always watch for Central Bankers making surprise announcements both here and abroad. -Gus Floropoulos, VP, The Federal Savings Bank
Bonds markets started slowly today, as traders digested strong consumer confidence and GDP projections, but by mid PM had staged a moderate rally. It's encouraging to build on yesterday's gains, but we can't proclaim the trend has changed just yet. It's the end of the month, which often generates temporary demand for bonds, and we'll get economic news from Europe and November's jobs numbers by Friday. Love the fact we're regaining ground, I'm just not ready to bank on it continuing yet. Tomorrow AM's rate sheets may show improvement from today's, so floating overnight may pay off, the larger decision is floating past that point. -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).