December 13, 2016
Mortgage rates started stronger out of the gate, but morning weakness in bond markets prompted many lenders to adjust rates higher by early afternoon. On balance, the average lender ended the day just a hair better than yesterday's latest levels. To be clear, we're talking about microscopic differences. Note rates are the same as yesterday. The most prevalent conventional 30yr fixed quote is 4.25%, followed closely by 4.125%. The microscopic improvement refers to changes in upfront costs/credits.
In the bigger picture, rates remain very close to the highest levels in more than 2 years. November proved to be one of the worst months in mortgage rate history, based on the abruptness of the move higher. The damage was primarily due to investors rapidly reassessing future growth and inflation potential following the election. By comparison, Fed policy has been less consequential. But tomorrow's Fed announcement can still cause volatility for rates.
While there is widespread agreement that the Fed will hike its policy rate tomorrow, 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
Since the Presidential elections, rates have done nothing but want to move higher. Tomorrow, we get the Fed announcement and without a doubt they will be hiking which is priced in but market will be paying attention to the press conference and the written statement to hopefully get a hint at the future timing of more hikes. As much as I want to be aggressive and say float, I think locking is the way to go. Even if we rally, I think it will be met with selling. Locking is the safe call. -Victor Burek, Churchill Mortgage
Rate markets idled in place today, ending near unchanged on the eve of Wednesday's Fed Policy Statement and Chairwoman Yellen press conference. It's a forgone conclusion that the overnight rate will increase by .25%, the wild card is the Statement's verbiage and Ms. Yellen's rhetoric afterwards. I see higher chances of rates continuing their recent slide than finding grounds to rally, my pipeline is locked. It would take a shocking amount of dovish comments to alter inflation expectations, I don't see it happening. Float at your own risk. -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).