January 9, 2017
Mortgage rates recovered much of Friday's losses today, moving back near the lowest levels in more than a month. To be fair, that's a claim they could have made on Friday, which was still the 2nd best day in a month despite the deterioration vs Thursday. 2017 has consequently been "so far, so good" for rates. When combined with the 2nd half of December, rates are a quarter of a point lower on average, and as much as a half point lower at certain lenders.
The most prevalent conventional 30yr fixed rate remains 4.125% on top tier scenarios. Today's improvement comes in the form of lower upfront costs (or a higher upfront lender credit, as the case may be).
There were no major reports or headlines driving the change in bond markets (which dictate rates). Thus, we're getting a clearer view of underlying sentiment among bond traders. Today's strength helps reinforce the notion that early December marked a point of resistance for November's rapid rate spike. It remains to be seen how deep of a rebound we'll get. Indeed, there's always a chance we've seen the extent of it with last Thursday's lows. But at the very least, the resilience allows for other strategies to be considered as opposed to the fairly ubiquitous and logical bias to lock at the earliest possible opportunity.
Loan Originator Perspective
Friday's sell-off appeared scary, but as we pay attention to technical levels, we are gaining more and more giving us a bit of confidence that interest rates may be rejecting higher levels, for now. I wouldn't take it as a sign of a reversal, but perhaps a sign of a new trading range we can dabble in. I don't see much benefit to floating vs. locking yet, but the case is building and perhaps will be solidified in the coming days as more data rolls out and our new president and his admin take office. Until we explicitly confirm a reversal in the momentum /direction of interest rates from moving higher, I believe locking in is the only option for all loans on a 30 day window to close. -Gus Floropoulos, VP, The Federal Savings Bank
Looks like the 10 year treasury not has found a new trading range from 2.42 on the high side to 2.32 at the lows. As of mid afternoon today, the 10yr is right in the middle. Not sure if there is much to be gained by floating, but I also do not see any need to hurry and lock. I would advise to lock any loan that is funding within 15 days. That way, you can lock on a shorter term lock and gain better pricing. I would float everything else. - Looks like the 10 year treasury not has found a new trading range from 2.42 on the high side to 2.32 at the lows. As of mid afternoon today, the 10yr is right in the middle. Not sure if there is much to be gained by floating, but I also do not see any need to hurry and lock. I would advise to lock any loan that is funding within 15 days. That way, you can lock on a shorter term lock and gain better pricing. I would float everything else. -Victor Burek, Churchill Mortgage
Bonds posted decent gains today, as our mini-rally continued. There's scant data to inform market participants this week, so any movement we do get won't be due to data. Looks like bonds are in a holding pattern, without enough motivation to move too far in either direction. As long as 2.42% holds on treasury yields (it's 2.37% mid PM), I don't see pricing worsening suddenly. It's nice to see fairly stable rates for a change! -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).