September 1, 2016
Mortgage Rates were slightly higher today, bringing them near their worst levels in several weeks. The caveats are twofold. First of all, the worst levels of the past several weeks are some of the lowest rates in history. Apart from July/Aug 2016 and scattered occasions in late 2012, rates are the lowest they've ever been. Second, recent rate movement has been contained in a tight range, meaning that today's rates aren't that much higher than the lowest rates over the past few weeks. Most lenders continue quoting conventional 30yr fixed rates of 3.375-3.5% on top tier scenarios.
If there is one day with the power to cause more meaningful movement, it's tomorrow. In fact, we could easily see the first major break above the recent range if tomorrow's Employment Situation report (aka "jobs report," "nonfarm payrolls," or simply "NFP") is much stronger than expected. Market participants figure this would greatly increase the odds of a Fed rate hike, and mortgage rates tend to move in the same direction as Fed rate hike probabilities. Of course there's every possibility that the jobs report comes in weaker than expected, and that could indeed result in rates improving tomorrow. But given that we're close to the high end of the range, it's unlikely that rates could improve enough tomorrow to challenge the lower end of the range.
With that imbalanced risk in mind, locking is much safer today.
Loan Originator Perspectives
Tomorrow we get non farm payrolls which can move rates very quickly. It is always wise to consider locking before this report. Only those who can afford to be wrong, should consider floating. -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).