Mortgage rates were at their highest levels in more than a week yesterday, but have fallen back to the best levels in 4 days today, on average. Some lenders are slightly higher than yesterday. Most are lower. In all cases, the overall scope of the movement has been exceptionally small after Monday’s big move higher. Most lenders are quoting conventional 30yr fixed rates of 3.75% to top tier borrowers though there are an aggressive few at 3.625%. The average quote would have the same contract rate as yesterday with the improvement being seen in the form of lower closing costs.
Despite the modest gains today, the broader short term trend has been toward higher rates. That said, the longer-term trend has unequivocally been toward lower rates and isn’t yet close to exiting that trend. While that does mean that those with longer time horizons or more risk tolerance might benefit from floating, rates are so close to long-term lows that the risk vs reward is questionable. It could become less questionable when and if rates break those recent lows, but until then, 3.625% is as low as average rates have been on a widely-available basis (late January). We’d need to see widespread availability of 3.5% in order to entertain the possibility that the downtrend is extending.
Loan Originator Perspective
“it was pretty sedate in the world of rates today. We posted slight gains as of mid-day, but barely enough to influence rate sheets. Boring isn’t always bad, it’s nice to be able to quote a rate in the morning and have it still be valid 7 hours later, but we can’t get complacent. Barring any international drama over the weekend, Monday looks quiet too. Floating borrowers might benefit by waiting until Monday. Whether the possible benefit is worth the risk is something to discuss with your loan officer.” –Ted Rood, Senior Originator
“Rates remain range bound with lenders offering pretty consistent rate sheets all week. We have no market moving data being released on Monday but we do get Retail Sales on Tuesday which could breaks us out of the recent range. I see no reason to lock today, so i would recommend to float all loans over the weekend. If you do float, be in touch with your lender early on Monday to evaluate locking opportunities. Seems rates rally in the morning then weaken throughout the day.” –Victor Burek, Open Mortgage
“Mortgage pricing seems to be in a waiting period now for something to push it in one direction or another. While we’ve had some ups and downs along the way rates sit basically right where they were 3 months ago. For now, until some impetus emerges, floating longer term locks appears safe (greater than 30 days). Of course, in the shorter term, the risk is greater of a movement worse that you can’t recover from in time for closing so evaluate carefully your tolerance for risk and act accordingly.” –Hugh W. Page, Mortgage Banker, SeacoastBank
“Mortgage bonds opened higher today but the gains faded away during the session. Mortgage bonds are technically overbought and can head lower in the near term due to profit taking. If you are closing in the coming week or 2 it may be best to Lock in and eliminate risk. Longer term you may still want to consider locking but if you do not mine risk you can float cautiously. –Manny Gomes, Branch Manager Norcom Mortgage
Today’s Best-Execution Rates
- 30YR FIXED – 3.625-3.75%
- 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 was Europe and the introduction of European quantitative easing.
- With European QE having now begun, we’re on high alert for a big picture bounce in European economic data, sentiment, growth, and rates. The more it looks like such a bounce is taking hold, the greater the risk that domestic bond markets and mortgage rates will also experience a big bounce higher. There was a possibility that the bounce occurred in February, but European bonds got back to the task of improving in March. This has helped calm the domestic bond market’s move toward higher rates.
- It’s a highly uncertain time for global financial markets. On the one hand, some believe we’re in the midst of a race among world central banks to devalue currencies and lower interest rates. Others believe that the global economy is turning a corner and rates will grind higher. That creates a lot of volatility, and volatility is bad for mortgage rates. One result is that they have a slightly harder time keeping pace with movement in Treasuries. That can be good or bad, depending on which way markets are moving. The other result is that there really is no way to be sure that today’s rates will be available a few hours from now. They could get better or worse, but the point is that there’s more change and movement in the mortgage market so far in 2015.
- 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).