Mortgage rates were slightly higher today, undoing the modest gains seen yesterday, but leaving the more significant drop from Tuesday intact. 3.75% remains the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios, though a few lenders will have drifted up to 3.875% with today’s weakness.
Today’s losses were a factor of both data and events. This morning’s economic data was mixed, but higher Durable Goods and Real Wages overshadowed higher Jobless Claims. The data started the ball rolling in a negative direction for the markets that affect mortgage rates this morning, and from there, several month-end trading dynamics made for steady losses throughout the day. Particularly, companies issued corporate bonds at a rapid pace this afternoon, and that issuance process can indirectly put some upward pressure on rates.
Tomorrow’s data and events stand a chance to take rates in either direction. At current levels, rates can afford to be receptive to the big data release, which is the 1st revision of Q4 GDP at 8:30am. If the data is much stronger than expected, rates could remain under pressure. If, however, GDP comes in weaker than expected, there’s room to improve. Beyond that, it’s good to keep in mind that rates won’t always move in a logical direction based on the data, and there’s more risk of that on the last day of the month where many traders are moving money for reasons that are unrelated to market fundamentals.
Loan Originator Perspective
“Our streak of good days looks to be ending today. The benchmark 10 year
note is still holding under 2.04 which is pretty solid support. Unless
your lender repriced for the worse today, you should be seeing similar
pricing today. Since we were unable to extend the past couple days of
gains, i think it would be prudent to lock short termers. As long as
2.04 holds, i would float longer term closings. Treasury supply is done
and tomorrow is month end, hopefully we see some bond buying by
investors.” –Victor Burek, Open Mortgage
“Rate markets treaded water today, albeit with small losses. Our hope is
that we’re establishing the upper end of the rate range. Any
pronounced gains would require serious motivation, and I don’t see that
looming. I’m counseling borrowers who are happy with their pricing to
lock and eliminate the risk of losing ground, at least until we start
trending lower on rates, not sideways to upward.” –Ted Rood, Senior Originator
Today’s Best-Execution Rates
- 30YR FIXED – 3.75
- FHA/VA – 3.25-3.5
- 15 YEAR FIXED – 3.00-3.125
- 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 has been and continues to be Europe.
- European bond yields 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.
- It’s impossible to know when Europe will turn a corner, and even then it’s only the sort of thing we’ll be able to observe in hindsight. That means every head-fake toward higher rates runs the risk of developing into a longer term rise, even if those risks vary greatly in terms of probability. Clients with longer term time horizons and who otherwise don’t mind losing some ground in exchange for the chance at locking even lower rates are the only ones who should float. Clients who must close by a certain date or who can’t afford to lose any ground on rates should generally be locking even though the longer term trend has been in their favor for over a year now.
- 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).