November 7, 2016
Mortgage Rates were unchanged today despite a fair amount of weakness in the bond market. Rates typically rise when bonds weaken. The absence of volatility is partly due to the fact that lenders didn't rush to offer improved rates on Friday afternoon when bonds strengthened. In the simplest terms, bond markets are right in line with Friday morning's levels and so are mortgage rates. Bonds have experienced some volatility between now and then, but lenders haven't chased it.
This notion of lenders being reluctant to adjust prices to every little market fluctuation is important. It has been, and will continue to be a theme when it comes to the near-term rate outlook. Lenders simply won't be willing to offer big improvements on mortgage rate sheets until they see a big, sustained rally in bond markets. The election is the most immediate source of uncertainty, but the early December announcements from the European Central Bank and the Fed could combine to create bigger market movement.
Loan Originator Perspective
Bond markets sold off slightly today, as we thankfully approach tomorrow's election. It's hard to say exactly how much the constant pre-election circus-like drama has improved our pricing, but we'll know soon enough. I still don't see significant roadblocks to rising rates, and until those appear, I'll keep locking sooner rather than later. Betting on lower rates here feels like bluffing with a pair of 4's. It might work out OK, but chances are greater it won't. -Ted Rood, Senior Originator
Very risky to be floating with the election tomorrow but you do have an easy choice. If you feel Trump will win, you will be rewarded by floating. If you feel Clinton will win, then you should lock today. Markets do not like the uncertainty. The market knows what to expect with a Clinton victory, but a Trump victory brings a lot of uncertainty so bonds will benefit in the short term with a Trump win. -Victor Burek, Churchill Mortgage
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).