Mortgage rates moved lower today as investors sought safe haven from global political risk in the bond market. When investor demand for bonds increases, rates generally fall, all things being equal. Today’s improvement was fairly healthy, too. You’d have to go back to January 23rd–exactly 2 weeks ago–to see anything better at the average lender. 4.25% has been the most common conventional 30yr fixed rate on top tier scenarios. While that’s still technically true, stronger lenders are increasingly moving down to 4.125% on days like today. Keep in mind that the difference between 4.125% and 4.25% isn’t quite as simple as 0.125%. True, the gap between “contract” rates (which governs the monthly payment) at stronger/weaker lenders would be 0.125%, but the gap between “effective” rates (which take upfront costs into consideration) is typically smaller. In other words, average lender-imposed upfront costs associated with 4.25% are smaller than the costs associated 4.125%. Today’s Best-Execution Rates
- 30YR FIXED – 4.125-4.25%
- 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).