Mortgage rates came roaring back today after the Fed held steady at record-low policy rates.  While the Fed Funds Rate doesn't directly dictate mortgage rates, the two tend to correlate over time.  At its most basic level, the Fed rate dictates the cost of short term money, which has ripple effects that carry through to longer term financing costs, like those associated with things like 10yr Treasury notes and mortgage rates.  

Not only did the Fed forego a rate hike, they were also noticeably more downbeat about inflation and global growth/stability.  It's just as likely that these longer-term implications helped longer term rates (like mortgages) do as well as they did today.   

All that having been said, the drop in rates merely brings them back in line with last week's best levels.  Considering they only rose from there due to Anxiety over today's Fed meeting, it's not unfair to say that rates are still in the same narrow range that's been in effect for more than 2 months.  The silver lining is that today could only be the start of a bigger move lower, though until that's clearly the case, it always makes sense to guard against the possibility that the first move after a Fed Announcement is a head fake.  With several lenders inching back into the high 3's today for conventional 30yr fixed rate quotes, playing defense should be more enjoyable.

Loan Originator Perspective

"Citing bearish global outlook and weak inflation, the Fed decided to keep rates unchanged today.   In the press conference, the lack of inflation was all the talk.  Bonds reacted very favorable to today's announcement and some lenders have repriced for the better but haven't passed along all the gains.  I would recommend to float over night to allow lenders time to make sure the gains hold so they can pass along the improvements." -Victor Burek, Churchill Mortgage

"Today's FED decision was most welcomed.  For all who locked in to protect their rate prior to the FED decision, you did the right thing.  For all who floated in anticipation, albeit crazy, good for you.  Moving forward we now have a better understanding of the FED's stance allowing us to be a bit more aggressive and bullish.  Loans cleared to close inside of 7 days should be locking, otherwise, you can watch this play out before finalizing your rate." -Constantine Floropouos, Quontic Bank

"Mortgage bonds got a nice boost after the Fed Decision today.  Rates were left unchanged and the Feds sounded extremely dovish.  We could see rates drift lower from this point forward especially of traders lock in some profits in the equity market.  I say float for now but keep a close eye on the market for things could turn around quickly" -Manny Gomes, Branch Manager Norcom Mortgage

"The Fed Statement and subsequent press conference with Chairwoman Yellen was surprisingly dovish, as the Fed not only held rates firm, but also mentioned numerous concerns that could impact future rate hikes.  Bonds have posted significant gains near closing, but are still only back to levels seen in early September.  It may take a day or two for markets to digest this significant change in Fed attitudes.  Will it sufficiently motivate rates to drop below 4%?  Tune in tomorrow, for the Friday edition of "As The Fed Turns." -Ted Rood, Senior Originator

Today's Best-Execution Rates

• 30YR FIXED - 3.875-4.0%
  
• FHA/VA - 3.75%
  
• 15 YEAR FIXED - 3.25%
  
• 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

• 2015 began with a strong move to the lowest rates seen since May 2013.  The catalyst was Europe and the introduction of European quantitative easing.  Investors bet heavily the move lower in European rates and domestic rates benefited as well.  But with those bets finally drying up in April and with the Fed seemingly intent on hiking rates in the US, May and June saw a sharp move back toward higher rates.  The implicit fear is that global interest rates set a long term low in April, and have now begun a major move higher.
  
  
• July said "not so fast" to that potential "big bounce."  Some of the data began to suggest the Fed is still a bit too early in talking about raising rates in 2015--particularly, a lack of wage growth or any promising signs of inflation.  But Fed proponents maintain that low inflation is a byproduct of temporary trends in the value of the dollar and the price of oil, and that once these factors  level-off, inflation will ultimately return.  That side of the argument suggests that inflation could increase too quickly if the Fed hasn't already begun normalizing interest rates.
  

• With all of the above in mind, locking made far more sense for the entirety of May and June, and we were not shy about saying so.  The second half of July saw that conversation shift toward one where multiple outcomes could once again be entertained.  In other words, we went from "duck and cover!" to "let's see where this is going..."  
  
  
• Bottom line, locking is always the safest bet and it was the only bet from late April through early July.  Since then, there's been room for other points of view.  We should know a lot more about how valid those points of view are as August and September progress.
  
  
• 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).