December 28, 2016
Mortgage rates moved lower today following back-to-back afternoons of improvements in underlying bond markets. Yesterday afternoon was only slightly stronger. It didn't result in many lenders offering mid-day improvements in rate sheets. Today, however, multiple lenders put out positive reprices after a well-received Treasury auction indicated strong investor demand in the bond market (higher demand for bonds = lower rates).
The average lender is back to their best levels since December 14th. Whereas 4.375% had easily been the most prevalent conventional 30yr fixed quote for top tier scenarios, 4.25% is at least as common today. All that having been said, rates were already fairly close to that tipping point. The range has been calm and narrow over the past 2 weeks. Today's move stands out against that backdrop, but isn't much more than an ordinary day any other time of the year.
The moral of the story is that there's been no fundamental change in the bigger picture, even though today's improvements are "nice."
Loan Originator Perspective
Even though we've seen some nice improvements in bond markets this afternoon, we need to wait for the second week of January for any real trading confirmation. Rates MIGHT be reluctant to go higher from here, but it's yet to be seen. I would lock in to play it safe until we see a change in momentum, until that point I believe defense is the only option. -Gus Floropoulos, VP, The Federal Savings Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.25-4.375%
- 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).