September 19, 2016
Mortgage Rates were unchanged for a third straight day, although several lenders did raise rates at the end of the day. That can happen when underlying bond markets (which dictate mortgage rates) move by a certain amount. There's no set formula for the amount of movement that will result in any given lender changing rates in the middle of the day, but it's not uncommon to see the less aggressive lenders simply wait for tomorrow before adjusting rates to match market conditions.
All of the above is a fancy way of saying that rates would be slightly higher tomorrow if bond markets don't change between now and then. Lenders continue quoting conventional 30yr fixed rates of 3.5% on top tier scenarios, with the runners-up being 3.625% and 3.375% in that order.
Keep in mind that Wednesday afternoon brings the FOMC Announcement (where the Fed releases its updated policy statement). This can be a significant source of volatility for rates markets. That said, volatility could already be picking up as the Bank of Japan releases its own policy update earlier in the morning. Although markets (and rates) can go either way in response to these events, big, negative reactions tend to happen faster and more abruptly than big, positive reactions.
Loan Originator Perspective
My rate sheets were largely unchanged from Friday today, but bond markets sold off slightly this afternoon, meaning tomorrow's may worsen slightly. The week's big events unfold Wednesday, with both a Bank of Japan (their version of the Fed) and actual Fed statement. If BOJ and/or Fed rhetoric stress economic growth or less accommodative monetary policy, it's virtually guaranteed rates will rise. Floating into Wednesday is a high risk proposition, with (in my mind) insufficient rewards for the risk. My pipeline of loans closing in the next 45 days are locked. Floaters beware. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.5%
- FHA/VA - 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).