January 24, 2017
Mortgage rates have been volatile recently, with 3 out of the past 5 business days seeing much-bigger-than-average moves. After improving nicely yesterday, rates rose quickly today by nearly the same amount. Relative to the recent landscape, this leaves us in the same territory as Thursday the 19th, on average. Throughout this volatile stretch, top tier 30yr fixed rates have averaged 4.125% during better moments and 4.25% on the bad days. The latter is slightly more prevalent today, but 4.125% is still out there.
A mere eighth of a percentage point might not sound like much. It may not even BE much if considered in terms of the monthly payment change (about $14/mo on a 200k loan). But for borrowers looking to move down an eighth from today's quotes, it would cost more than $1000 on that same $200k loan. Granted, single day moves of .125% are uncommon, but we've seen moves half that big on a fairly regular basis recently.
Loan Originator Perspective
Days like today have become all too common for us rate watchers. Fortunately we are still in the broader range for rates, technically our little "safe haven". Conceptually as we get to the support level (the top of the range) the strategy would be to float in anticipation of reversal within the range and lock as we approach the resistance (the bottom of the range). Unfortunately, the overall volatility and uncertainty remains too high for me to risk floating and the range crumbles. I recommend locking into the weakness as a defensive play for all loans with a 30 day window to close. -Gus Floropoulos, VP, The Federal Savings Bank
I like locking today. The 10 Year was unable to hold below 2.42, so contact your lender and get locked in before they reprice for the worse. If you choose to float, you should hope for a solid treasury auction tomorrow and Thursday. It isn’t uncommon for bonds to rally after new supply has been absorbed. -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).