New Year Starts Neutral, and That Suits Lenders Just Fine


Happy New Year, as this is the first time we’ve chimed in on the news for 2017. “Happy” New Year might be a bit of a stretch, but it certainly hasn’t been an unhappy first few days of market activity, and that’s a relief to many. After all, December saw dramatic shifts—based on Federal Reserve announcements and other elements—which drove mortgage rates as high as 4.5 percent. Things have been calm so far and that’s good enough for many.

To get a better picture of this week’s rates, we can’t start on Wednesday. Tuesday’s news was far more relevant, marking the lowest rates in nearly a month. Granted, these weren’t as exciting as the lowest rates in almost a decade (which we saw for prolonged periods last Summer), however it did touch a soothing nerve among analysts following a hurdy-gurdy December.

Basically, as of Tuesday, only the most nervous of lenders were settled at anything more than 4.25 percent for a 30-year fixed. Some of the more eager lenders even got down as far as 4.125 percent following some positive movement in the bond market later in the day.

Our readers realize, of course, that this segment normally reports on Wednesday’s rates, not Tuesday’s. And indeed, mortgage rates took a slight step upward in the middle of the week. Which is to say not all that much higher, however borrowers aren’t going to find many 4.125 percent offers today. But 4.25 percent is still a fairly safe bet.

“Bonds sold off slightly today, as traders looked to Friday’s NFP jobs report,” said Ted Rood, senior originator for MB Financial Bank Residential Mortgage. “There’s still no definitive trend here, and I don’t see the potential for meaningful pricing improvement until we get some bearish economic data. The smart move, to me, remains locking early. Floating could yield some small gains, but likely not enough to justify the risk for all but the most risk tolerant clients.”

Rood may have identified his trend, in the form of the Nonfarmers Payrolls jobs report. Early indicators suggest that the the Department of Labor is expecting a strong December report, which will be the last of the Obama administration.

If true, that will push rates up, if anywhere. Even if rates don’t react to the Friday announcement, it will play into the Fed’s plan for multiple Federal Interest Rate increases during 2017. Stay tuned.

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