January 4, 2018
Mortgage rates moved higher today, following stronger economic data at home and abroad. In general, stronger economic data implies better growth, higher stock prices and higher rates. Although the traditional levels of correlation between data and rates have been thrown off for various reasons over the past year, we still see examples of that correlation from time to time. Today was one of those days.
Economic data was stronger in Europe and Asia during the overnight session. This resulted in bond markets moving toward higher rates even before the domestic economic data came out. Today's most significant domestic data was the ADP Employment report, which showed payroll creation of 250k per month compared to forecasts calling for 190k. This speaks to the potential for Friday's official numbers from the Labor Department (more important than ADP) to stage a similar performance (which would be bad for rates, all things being equal).
In today's case, bond traders weren't ready to send rates straight to the moon. Bonds (which dictate rates) recovered most of their losses by the afternoon. Several mortgage lenders adjusted rate sheets accordingly, but on average, today's rates are the highest since last Tuesday. Specifically, the average lender is quoting 4.0-4.125% on top tier scenarios (30yr fixed, conventional).
Loan Originator Perspectives
Bond markets surrendered yesterday's gains today, as ADP's estimate of December private jobs growth exceeded expectations. The critical part of tomorrow's NFP jobs report may be the wage component, rather than actual jobs gained. At any rate, there's been more robust economic news than tepid recently, and as long as that's the trend, the smart thing to do is lock early and not look back. -Ted Rood, Senior Originator
Bonds opened up considerably weaker this morning resulting in worsened rate sheets from the prior day. As the day has progressed, bonds have recovered just about all of the early morning losses. Unless your lender reprices for the better today, i would take the risk and float overnight. If you do want to lock today, hold off until as late as possible to give your lender time to reprice for the better. -Victor Burek, Churchill Mortgage
Today's Most Prevalent Rates
- 30YR FIXED - 4.0%-4.125%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.375%-3.5%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2017 had proven to be a relatively good year for mortgage rates despite widespread expectations for a stronger push higher after the presidential election in late 2016.
- While rates remain low in absolute terms, they moved higher in a more threatening way heading into the 4th quarter, relative to the stability and improvement seen earlier in 2017
- The default stance for now is that this trend toward higher rates has the potential to continue. It will take more than a few great days here and there for that outlook to change.
- For weeks, this bullet point had warned about recent stability inviting a bigger dose of volatility. That volatility is now here. As such, locking is generally the better choice until the volatility is clearly dying down.
- Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are "effective rates" that take day-to-day changes in upfront costs into consideration.