Mortgage Rate Decline Limited by Holiday

Mortgage rates were slightly lower today, but it was in no way indicative of the improvements seen in the mortgage-backed-securities (MBS).  MBS, above anything else, dictate mortgage rate movement, but the relationship isn't always one to one.  Shortened holiday-related trading sessions are prime time for these periodic disconnections.  In other words, it's not at all uncommon for lenders to hold off on adjusting rate sheets as much as they otherwise might.  

Even against those headwinds, the week is ended with rates at their best levels since the morning of October 15th, which saw the best rates in roughly a year and a half.  More than a few borrowers wished they could have locked their rates that morning, and many waited for a bounce back to those lows that never materialized.  Of course today's rates essentially mean we DID get back to those lows, but only after waiting for a month and a half.  While the recent, methodical drop in rates means there's an infinitely better chance of holding ground this time around, long-term lows can't ever be taken for granted. 

Today's most prevalently-quoted conforming 30yr fixed  rate for top tier borrowers is 3.875% with 4.0% not far behind.  If the underlying MBS prices were to hold perfectly still on Monday, 3.875% would pull out to a clear lead.

Loan Originator Perspective

"The trend is your friend right now and if we can stay under 2.20 on the 10 Yr Bond the holidays look poised to be in the gift giving mode. Floating for now seems safe but if your closing is within 15 days and you've reaped some gains recently a move to lock in those gains would certainly not be foolish." -Hugh W. Page, Mortgage Banker, Seacoast Bank

"I have been in the float camp for some time now. I believe floating is still the best thing to do for it looks likely rates may decline further. The price of oil is falling which may lead to deflation chatter which is always bond friendly. Stocks are also due for a breather which I believe is right around the corner. The sell off in stocks will help bonds appreciate further bringing down home loan rates. " Manny Gomes, Branch Manager Norcom Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 3.875-4.0
  
• FHA/VA - 3.5
  
• 15 YEAR FIXED -  3.125-3.25
  
• 5 YEAR ARMS -  3.0 - 3.50% depending on the lender

Ongoing Lock/Float Considerations

• The hallmark of 2014 has been a narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets punished that imbalance with a paradoxical move lower.
  
  
• European markets helped that process along and continue to play a prominent role in keeping US rates lower than they otherwise might be.  

• For most of the Summer and early Fall months, rates held a narrow range of 4.125% -4.25% (essentially where the 2014 rate recovery has bottomed out) and finally broke to a 3.875%-4.0% range in mid-October.  After correcting back to 4.125% briefly, November saw a calm, supportive trend that helped establish a ceiling.  From there, rates trickled back down into the high 3's by the end of the month.
  
  
• 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, 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).