November 4, 2016
Mortgage Rates were slightly lower today--a counterintuitive move considering the big jobs report was slightly stronger that expected. To be clear, the headline of the jobs report (nonfarm payroll growth) was actually a bit lower than expected, but positive revisions to the previous 2 months more than made up it. The broadest unemployment metric (U-6) fell from 9.7 to 9.5%. And wage growth not only beat expectations, but was also revised higher for the previous month. All in all, it was definitely a better-than-average report, despite the weakness in headline job growth.
Rates typically move higher when the jobs report is strong. At first, it looked like today would be no exception, but US bond markets (which dictate interest rate movements) increasingly benefited from a strong day in European bond markets. There's always a certain degree of interconnectedness, and when things are moving fast enough on one side of the Atlantic, the other side tends to get pulled in the same direction. Simply put, Europe pulled harder than the jobs report, and in a friendlier direction to boot.
All that having been said, we're talking about nearly microscopic levels of movement. Many borrowers would be quoted the exact same rate as yesterday. Any detectable improvement would be limited to a modest decrease in closing costs. 3.625% remains the most prevalently-quoted conventional 30yr fixed rate on top tier scenarios. In general, lenders are reluctant to drop rates too quickly in light of potential volatility heading into the end of the year. This decreases the risk and reward associated with floating vs locking.
Loan Originator Perspective
October's NFP jobs report turned out to be a non-factor for bond markets, as it held few surprises. MBS and treasuries posted small gains in mid PM trading. A December Fed rate hike is priced into current markets, the next big unknown is Tuesday's election. Risk averse borrowers should lock by Tuesday AM, presuming they're closing within 30 days. With best execution rates still around 3.625%, sure could do worse than locking now. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.625%
- FHA/VA - 3.25-3.5%
- 15 YEAR FIXED - 2.875%
- 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
- Clearly-defined uptrends provide higher-than-average motivation to lock
- 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).