Mortgage rates began the day decidedly lower than yesterday, but most lenders ended up revising rates higher in the mid-morning hours due to bond market weakness. Investors remained on edge heading into the release of the Minutes from the Fed's most recent meeting.
Markets were generally prepared for the Fed Minutes to support recent Fed comments regarding faster rate hikes and a reduction the Fed's balance sheet. By continuing to reinvest proceeds from its balance sheet, the Fed is helping to keep mortgage rates much lower than they otherwise would be.
The Minutes ended up being slightly less threatening than expected. Bonds consequently improved. Several mortgage lenders have offered rate sheet improvements as a result. If bond market levels were to hold here through tomorrow morning, the average lender would be offering slightly lower rates than they are currently.
All of this is splitting hairs though. We're talking about very small changes in the closing cost side of the mortgage rate quote equation. Average top tier rates continue running in the 4.125%-4.25% range. Day-over-day changes vary by lender (some are higher, some are lower), but many borrowers would see the exact same quote as yesterday.
Loan Originator Perspective
Markets have been overwhelmingly volatile, and continue to pose a major dilemma for all borrowers who are not protected. It is too speculative to determine if rates may improve in an economic environment that is clearly supporting stronger growth in income, jobs, economic expansion and deregulation. Locking in at application is the only way to ensure your success. Take the risk off the table, lock in, even if for 60 or 90 days. -Gus Floropoulos, VP, The Federal Savings Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.125-4.25%
- FHA/VA - 3.75-4.25%
- 15 YEAR FIXED - 3.375-3.5%
- 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).