Mortgage rates moved lower today, generally recovering the losses seen last Friday.  This brings many lenders back in line with the lowest levels since November 17th, although last Wednesday (Jan 11) was slightly better on average.  There hasn’t been enough volatility to unseat 4.125% as the most prevalent 30yr fixed “note rate” on top tier scenarios.  As such, today’s improvement is limited to “effective rates” (which take closing costs into consideration).

Heading into the 3-day weekend last week, we discussed the risk that the recent trend toward lower mortgage rates may have run its course, but that we’d need to wait until today to confirm.  Today’s improvements keep hope alive.  That’s no guarantee that rates will move lower, but at the very least it leaves borrowers with more options.  On the one hand, locking makes good sense with rates near the bottom of the recent range.  Those hoping for further improvements have some additional room overhead to set a “stop-loss” (a higher rate that would serve as the signal to lock and avoid further losses) at Friday afternoon’s rates.

Loan Originator Perspective

Bond markets posted moderate gains today, as Brexit chatter and Fed rhetoric combined with mild stock losses.  We’re still firmly in our recent ranges for both MBS and treasuries, so no remarkable rallies just yet.  I’m surprised more lenders didn’t reprice better as the day wore on, perhaps tomorrow’s rate sheets will reflect the improvements.  I’d float overnight to see what tomorrow brings if starting your loan, presuming you’ve got at least a modicum of risk tolerance.   –Ted Rood, Senior Originator

Rates continue to move sideways in a well defined trading range.   While this range holds, I would float until you get within 15 days of funding, then lock.   15 day locks render you the best pricing.    Of course, things can change quickly, so stay in touch with your loan officer.  –Victor Burek, Churchill Mortgage
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 termedbest-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).