January 20, 2017
Mortgage rates rose slightly today, on average, but performances varied by lender and depending on the time of day. Rates were higher across the board this morning as global bond markets added to yesterday's weakness (weaker bond markets = higher rates, in general). Investors were on edge ahead of Trump's inauguration address as there was speculation that he'd offer more details on specific stimulus plans. When those details never came, markets reacted accordingly. Stocks moved lower and bond markets improved. Several lenders were thus able to offer mid-day rate improvements. This took the average to "just slightly higher" from "decidedly higher" earlier this morning.
4.25% remains the most prevalently-quoted conventional 30yr fixed rate on top tier scenarios. Some lenders are up to 4.375% after this week's somewhat abrupt spike and a scant few remain down at 4.125%.
For some borrowers, this week's biggest impact on housing expenses comes not from rates, but from the FHA mortgage insurance news. As feared, just over an hour after the inauguration, the Trump administration revoked the mortgage insurance cut announced earlier this month. For those affected, the change in monthly payment would have been roughly equivalent to a 0.375% change in rate.
Loan Originator Perspective
I am not a fan of locking on Friday and today is no different. Starting around 2pm today, bonds have started to move into positive territory, so I am hopeful that 2.50 on the 10 year will serve as a ceiling to prevent a move higher. With the recent weakness from yesterday and the late day rally, lenders will be very slow to pass along any improvements. So I favor floating over the weekend and evaluate pricing on Monday. -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.25%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 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.
- 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).