February 5, 2016
Mortgage rates were mostly unchanged today, though a few lenders were microscopically higher in cost. That's an uncommon result for the day of the big jobs report release, but in today's case it may be somewhat understandable.
More often than not, the most important part of the Employment Situation data--at least as far as markets are concerned--is the top line job creation (aka "nonfarm payrolls" or simply, NFP). The median forecast for today's NFP was 190k and actual job creation fell well short of that at 151k. Normally, that's all bond/mortgage markets would need to know before moving toward lower rates, but there were caveats.
The unemployment rate moved slightly lower than expected and wage growth improved much more than expected. The latter has been increasingly important when it comes to deciding how to react to the jobs report each month. When combined, the caveats were enough to offset the slower pace of job creation. Bond markets were weaker in the morning, resulting in most lenders beginning the day with slightly higher rates. Bonds improved in the afternoon as stocks and oil prices fell, allowing some lenders to release rate sheet improvements, thus bringing the average back near unchanged levels.
The most prevalently-quoted conventional 30yr fixed rate remains 3.75% for top tier scenarios with a handful of the more aggressive lenders at 3.625%. The average lender is right in line with their lowest rates in more than 8 months.
Loan Originator Perspective
"Bonds barely blinked at today's tepid NFP report. While the net jobs gained disappointed, increased hours and wages hinted at eventual inflation. We're still hanging very near recent lows on treasury yields (1.85%), and the longer we do, the better. It's hard to say if rates are now holding or slowly tending lower, that answer will depend on next week's data. The only loans I am floating are well over 30 days from closing. I don't see much incentive to float those ready to close, better to book the gains and sleep soundly." -Ted Rood, Senior Originator
"If floated into today, I would continue floating over the weekend. Rates opened a little worse this morning before NFP, but as of mid day all losses have been regained. Only a couple lenders have repriced for the better and I suspect more reprices for the better will be few and far between today." -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.625 - 3.75%
- FHA/VA - 3.5%
- 15 YEAR FIXED - 3.125
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- The Fed finally hiked on December 16th. The baseline implication would be steady pressure toward higher interest rates, but there's been "a catch" so far in 2016
- Global financial markets came into the new year in distress. Major stock indices are plummeted around the world, and investors sought shelter in the bond market. When investor demand for bonds increases, rates fall.
- So we're left with much lower mortgage rates despite the Fed having just begun its hiking cycle. This paradoxical trend can continue as long as global market turmoil fuels a demand for safer haven investments. A big bounce in oil/stock prices could mean trouble for rates--at least temporarily.
- 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).