Mortgage rates moved higher at a much quicker pace today.  This runs counter to the most widely-circulated weekly rate report from Freddie Mac, which indicates a new low for 2014.  The Freddie data isn't wrong, just a little behind.  Still, it's important for consumers to understand that today's rates are no longer the year's lowest.

This is a fairly common discrepancy between Freddie's rate survey and reality, and it's only a problem when markets move sufficiently after their survey results are in.  Considering that usually occurs by Tuesday, you may already be able to guess why such a survey is now outdated.  Simply put, yesterday and today combined for the biggest 2-day move higher in rates since April.  Today's adjustment was much bigger than yesterday's, and was completely unavailable to be counted in the survey.

In terms of rate quotes, the most prevalent conforming 30yr fixed rate for top tier borrowers was on the verge of moving down to 3.75% as of Tuesday (so it makes good sense that this week's Freddie survey was the best of the year), but moved back up to 3.875% yesterday.  While 3.875% is still slightly more prevalent, we're closer to 4.0% being the runner up at most lenders.  In almost all cases though, the costs associated with 3.875% make it a sweet spot in terms of efficiency.  That could mean it makes sense to pay extra upfront costs to move down to 3.875% if you're currently being quoted 4 or 4.125.

Loan Originator Perspective

"Yesterday's weakness continued into today, with the benchmark 10 year finding some support around the 2.22 level. I continue to favor floating all January closings and have locked up all December closings already. If you are still floating, and closing in December, i think i would continue to float into tomorrow. The rate sheets i have viewed looked like lenders took away much more than was justified which isnt surprising with the amount of weakness we saw yesterday and this morning. I suspect that if we just hold at current levels, lenders will pass along better pricing." -Victor Burek, Open Mortgage

"With the little bounce higher today in rates, it may be a good time to lock your rate and put that worry to bed. If rates improve, a renegotiation can be had. Floating is a risk that I would not take considering we’ve bounced off 2014 lows." -Michael Owens, Vice President of Mortgage Lending, Guaranteed Rate

Today's Best-Execution Rates

• 30YR FIXED - 3.875
  
• FHA/VA - 3.25
  
• 15 YEAR FIXED -  3.125
  
• 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.  This continues to serve as a reminder that prevailing beliefs about where rates will go won't necessarily be correct simply because they're the most prevalent.
  
  
• European bond yields have trended constantly lower in 2014, thus playing a prominent role in keeping US rates lower than they otherwise might be.  Many feel that Europe will continue to slide until their central bank engages in US-style quantitative easing.  Some see this happening in early 2015.  In any event, we're looking for a turn in Europe, first and foremost, before worrying about the longer-term trend in bond markets being at serious risk of reversing.
  

• Much of 2014 could be considered "sideways to slightly lower" in terms of mortgage rates.  All things considered, it actually has been a remarkably gentle drift lower.  Things became less gentle in mid October when rates briefly broke into the high 3's.  They came back for a more gradual, determined push into the 3's in December.  Some of the late-year strength is being chalked up to an epic slump in oil prices.  This drags inflation expectations lower, which is a net-positive for interest rates.
  
  
• 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).