December 21, 2016
Mortgage rates continued the normal late-December trend of minimal movement today, but the average lender managed a microscopic improvement. This wasn't nearly enough to change rates themselves (i.e. the "note rate" would be the same as it was yesterday on any given quote), but some quotes had slightly lower upfront costs.
While they may be better than yesterday, today's rates are still very close to the highest levels since April 2014. 4.375% remains the most prevalent conventional 30yr fixed quote for top tier scenarios. Several lenders still up at 4.5% and a few are down at 4.25%.
Barring the unforeseen, lenders will have little incentive to make meaningful adjustments to rates between now and the end of the year, thus decreasing the risk and reward associated with a "lock vs float" decision.
Loan Originator Perspective
It's pretty quiet out here. I am locking all loans at application for clients who aren't willing to risk markets treading higher. Some loans that have been floating are starting to come to reality and are locking in as well. The markets made decisive moves higher and we are currently experiencing rates form new highs every week or so. Defense is the only palatable option for now, unfortunately. Extended rate locks are recommended due to the holiday lag heading into January, and the holiday hangover in the early new year. -Gus Floropoulos, VP, The Federal Savings Bank
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).