December 8, 2016
Mortgage rates were only somewhat higher today, on average, and some lenders were actually right in line with yesterday's offerings. All this despite the fact that the European Central Bank (ECB) confirmed rumors that it was planning on reducing the amount of bonds it buys each month. While many of the details are different, this is functionally similar to the Fed's mid-2013 acknowledgement that sparked the taper tantrum (which began 2 of the worst months in the history of mortgage rates).
Thanks to lumps already taken as a result of the election, rates were relatively unfazed by today's ECB news, but not so unfazed that we should break out the champagne just yet. Bond markets still had an unfavorable reaction, and on average, rates did move higher. Additionally, we're already operating very close to 2-year highs, so it's hard to get too excited about anything that leaves rates in that territory--even if it's not prompting an ugly move to even higher highs.
4.125% remains the most prevalent conventional 30yr fixed rate on top tier scenarios with 4.25% not too far behind. 4.0% is a distant third. Today's rates are just a hair lower than Tuesday's for most lenders.
Loan Originator Perspective
Bonds weathered the ECB's policy statement and Chairman Draghi's press conference today, as it largely followed expectations. My morning rate sheets were down slightly from Wednesday's, but we could improve later this PM. There's no longer a confirmed upward trend in rates, treasuries seem content to drift near 2.4%. The "lock/float" scale is largely balanced for now, but if you choose to float, make sure you communicate your goals and expectations with your lender. -Ted Rood, Senior Originator
"Well the ECB mentioned the T word, taper…but bonds looked to have already have the news priced in. As long as 2.42 on the benchmark 10yr holds, I would float. Bonds opened up much weaker following the ECB news, and rate sheets reflect that. Since about 9am where most rate sheets are out, bonds have gradually continue to recover much of the losses. If you want to remove all risk and lock today, make sure you do so late in the day to allow time for lenders to pass along the improvements. " -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.125-4.25%
- 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).