August 26, 2016
Mortgage Rates were unchanged to slightly lower this morning following the much-anticipated Jackson Hole speech from Fed Chair Janet Yellen. Markets were looking for clues about upcoming rate hikes, but true to form, Yellen played things close to the vest. Underlying bond markets initially indicated higher rates due to Yellen's comment about the case for rate hikes having strengthened in recent months, but ultimately, this isn't anything markets didn't already know. As such, bonds swung back in the other direction, thus providing a drama-free backdrop for mortgage rates.
Unfortunately, that backdrop didn't stick a around as other Fed speakers gave investors more cause for concern. Underlying bond markets weakened into the afternoon and most lenders raised rates moderately. Even so, rates themselves will not have changed day-over-day, but closing costs for any given rate can vary slightly.
The onus for more pronounced market movement is on next week's deluge of economic data. Risks are more balanced now in terms of locking/floating. Ultimately, we're still waiting for a break in the range, and strategy will adapt accordingly, depending on which direction rates begin to move.
Loan Originator Perspectives
Initial reaction to Yellen was negative, but we've recovered for now. Nothing lost or gained, at these levels locking in makes the most sense. -Constantine Floropoulos, VP, The Federal Savings Bank
If you didn't lock prior to Jackson Hole speech by Yellen, I would float over the weekend. So far, bond traders like what she has to say and bonds are at their best levels of the past few days. Things could get volatile, so stay in close contact with your loan officer incase the market moves quickly the other direction. -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.375 - 3.5%
- FHA/VA - 3.0 - 3.25%
- 15 YEAR FIXED - 2.75%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- In the biggest of pictures, "global growth concerns" remain the driving force behind the long-term trend toward lower rates
- Amid that trend, periodic corrections toward higher rates can and will happen. These can happen for no apparent reason, or they can be brought on by changes in expectations surrounding central bank policy at home and abroad, as well as geopolitical and systemic risks
- Time horizon and risk tolerance are 2 variables to consider when it comes to locking. If you have plenty of time and don't mind losing some ground, set a limit as to how much higher rates could go before you'd lock to avoid further losses, and then float in the hopes of never seeing that limit.
- In the shorter-term, it's always good to look for lock opportunities after rates have been moving lower or sideways repeatedly, especially if they've since begun to move back up in any sort of consistent way.
- 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).