Mortgage rates stayed close to the highest levels in more than 2 years today, even though underlying bond markets left plenty of room for improvement. Typically, when bond markets improve as much as they did today, rates would be noticeably lower. The inconsistency has to do with more conservative lender pricing strategies surrounding the holiday season.
Why does this happen? There can be a variety of reasons. At the most basic level, keeping rates higher than they otherwise might be is a way to decrease new business volume. That might not sound like a good thing, but it can be if it keeps customer service optimal during times of decreased staffing levels. On a more esoteric level, it’s hard for lenders to offer their most aggressive rates when bond market participation wanes during the holidays. Think of the bond market like the wholesale swap meet where lenders go to get the funds to do your mortgage. The more robust the activity is at that swap meet, the easier it is for the lender to get a good enough deal to offer better prices (aka “lower rates”) to you!
All this having been said, a few lenders did update rates this afternoon, offering slight improvements. The average effective rate (which adjusts for closing costs) fell just slightly, but the average contract rate for a conventional 30yr fixed loan remained at 4.375% for a top tier scenario, with several lenders still up at 4.5%.
Some of the latest, local mortgage rates according to Bankrate.com are:
|Pinnacle National Bank||4.272%|
|Community First Bank||4.153%|
|IAB Financial Bank||4.273%|
* The above mortgage loan information is provided to, or obtained by, Bankrate. The rate is based on 30 year fixed rate mortgage and a loan of $300,000.