December 22, 2016
Mortgage rates did nothing today. They did less than nothing. This week is already easily on track to be the calmest since the election. And if tomorrow is similarly lifeless, it will be one of the calmest weeks ever.
Oftentimes, I'll note that it's the AVERAGE effective rate that's "unchanged." Indeed, it's quite uncommon for almost every single rate sheet in our ongoing study to be the same as the previous day. But that's exactly what happened today. In fact, this week's rate sheets have seen less change overall than any other week this year.
This is to-be-expected, to some extent, due to seasonal considerations. The fact that underlying bond markets have been holding steadier than normal accounts for the extra stability in mortgage rate sheets.
Stability may be worth something, but it's not the greatest thing in the world when rates are staying stable near the highest levels in more than 2 years. 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
Weaker inflation data was the highlight of the morning. As Matt Graham has been writing for days now there is limited activity in trading as most people are focused on the holidays. That being said, locking in makes the most sense. Avoiding any unpredictable volatility that may be coming our way. Defense wins championships. -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).