December 16, 2016
Mortgage rates stayed steady today, on average, though any given lender could be slightly better or worse compared to yesterday. Bond markets (which underlie rate movement) are beginning the process of winding down for the holiday season. That doesn't mean that rates won't move for the rest of the year--simply that the intraday rate movement will be more random. This can be frustrating in the coming weeks because it can result in big changes without any warning based on the slate of events on the calendar (typically, we know which events run the risk of causing big moves ahead of time).
That's just as well considering the prevailing strategy for more than a month has been to expect higher rates until we see a meaningful move back toward lower rates. In this context, the minimum requirement to achieve "meaningful" status would be three consecutive days of improvements with the third day bringing rates to 2-week lows or better. Granted, with each new step toward higher rates, additional weakness becomes less and less likely, but attempts to catch this falling knife (i.e. trying to predict when rising rates will take a break) have been ill-advised so far.
Conventional 30yr fixed quotes are running between 4.375% and 4.5% on top tier scenarios for most lenders. A few are higher (4.625%) and lower (4.25%). On average, today's rates are the highest since April 2014.
Loan Originator Perspective
Trend is not our friend. In this market, you have to lock as soon as possible. Even if we get a small rally, lenders will be hesitant to pass along improvements. Way too much volatility. -Victor Burek, Churchill Mortgage
Last couple of days have beaten us to the ground, following the last few weeks that also beat us to the ground. It makes a limited amount of sense to float in these times, locking for the appropriate time is required as soon as possible to avoid any further volatility. I think right now guessing when/if a reversal happens is a losers game, defense is the only strategy. -Gus Floropoulos, VP, The Federal Savings Bank
What a week/month it's been! My rate sheets now feature rates in the 5's for the first time since early 2013. Guessing clients who were quoted rates in the 3's in October may require EMT services when they hear current pricing. Life will go on, but borrowers will take a while to adjust after multiple years of "all time low" rates. My entire pipeline is locked, and new loans will be as well, as soon as feasible. Floating now is foolhardy. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.375-4.5%
- FHA/VA - 4.0%
- 15 YEAR FIXED - 3.375-3.5%
- 5 YEAR ARMS - 3.0 - 3.5% 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).