December 12, 2016
Mortgage rates were mixed today, depending on the lender, as well as the time of day. Earlier this morning, most lenders were quoting slightly higher rates compared to last Friday. As the day progressed, bond markets worked through some of the events that had been causing anxiety and trading levels improved. That paved the way for several lenders to offer mid-day improvements on rate sheets. This brought the average lender back to 'unchanged' by mid-day, and just barely lower by the end of the day. 4.25% remains the most prevalently-quoted conventional 30yr fixed rate on top tier scenarios, but 4.125% is nearly as common.
Bond market anxiety remains over the next 2 days, which could serve to limit the potential for a big bounce back. There is widespread agreement that the Fed will hike its policy rate on Wednesday afternoon, but investors are nonetheless curious to see how the Fed's economic projections evolve. This will help market participants get an idea of how the Fed is leaning with respect to future hikes, and it's the expected pace of those future hikes that do most to influence mortgage rates in the present.
Loan Originator Perspective
Bonds rallied to overcome AM losses today, but treasury yields remained above Friday AM levels. Yields breached the 2.42% resistance we hoped to stay below, a bearish signal for treasuries. Bond buyers appear unmotivated at these levels, and I don't see any bond positive news looming. I'm still in "lock early" mode, although I'd wait until end of day Monday to lock, as several lenders have improved their AM pricing. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.25%
- FHA/VA - 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).