January 11, 2017
Mortgage rates fell today, in many cases to levels not seen in well over a month. The average lender was just a hair better than last Thursday, meaning you'd have to go back to November 17th to see anything better.
4.125% is still the most prevalent conventional 30yr fixed rate on top tier scenarios, with today's improvements seen in the form of upfront costs. In other words, "effective rates" (which take closing costs into consideration) are lower while "note rates" (which is just the rate applied to your mortgage balance) are generally unchanged.
What's behind today's move? First of all, lenders are increasingly able to offer rate sheet improvements even if bond markets simply hold their ground. Lenders had extra cushion built into late December rate sheets as bond markets deteriorated and as financial markets were thinly-staffed. As bond markets hold their ground in the new year, that cushion can shrink a bit. When bond markets improve, it makes an even clearer case for improved rate sheets.
Today's Trump press conference and 10yr Treasury auction both saw bonds improve (implying lenders can offer lower rates), but traders weren't interested in chasing an aggressive move just yet. Bond markets bounced back from "great" to "good" in the afternoon.
Loan Originator Perspective
Bonds continued to march in place today, returning to yesterday's prices after brief gains following strong treasury auction results. The good news is the advances lasted long enough for many lenders to reprice better, the bad news is they are now history. We're cementing the current range in place, which sure beats watching rates rise daily. It appears there's minimal risk in floating/benefit in locking now, but no shame in locking, then sleeping soundly at night. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.125%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25-3.375%
- 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 return to pre-election levels until well after Trump takes office. Rates can move for other reasons, but it would take something big and unexpected for rates to get back to pre-election levels.
- 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. The beginning of 2017 may be bringing such a push, but there's no telling how long it will last.
- 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).