Mortgage rates made a strong move lower today, erasing the entire week’s losses and regaining levels last seen on October 30th and 31st. In fact, for both Treasuries and mortgages, rates improved more today than on any other day since October 15th. 4.125% had been increasing in prevalence this week in terms of the average quote for top tier borrowers on conforming 30yr fixed loans. Today’s improvement tips the balance decidedly back in favor of 4.0%.
There’s reason to believe that pricing will improve next week even if underlying trading levels merely hold steady. Of course rates can ALWAYS go higher or lower, but today was important in that it at least gives us a fighting chance to reverse the trend.
Loan Originator Perspective
“In the very short term, I wouldn’t suggest a lock today at all. The
gains haven’t been passed through, which isn’t unusual for a Friday NFP
day. Monday would be an option for short term locks – 30 days max.
Outside of that window, I would want to know risk tolerance for rate
movement with my clients and advise them accordingly, with a bias
towards floating and strategically intra-day locking on dips.” -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
“My only advise is to be careful or work with a lender that is plugged in
to the intraday moves in the market. I feel volatility is ahead and
whether that volatility will lead to better rates or not is yet to be
seen. My opinion is to float, but cautiously for the time being. If
closing within 15 days consider locking in these improvements today if
your lender improves their pricing by end of business as many have done
already.” –Steve Chizmadia, Sr. Mortgage Advisor, American Capital Home Loans NMLS# 81395
“Great day for everyone in the process of obtaining a mortgage as we
experienced a strong reversal of the recent rise in interest rates. We
are certainly not out of the woods and what happens over the weekend and
next week can potentially erase today’s improvements quickly,
regardless we are happy to have won today’s battle with the almighty
jobs report. Today’s move marks a strong point for technical rejection
(in my opinion) of rates rising (at least for now) as we look forward
with optimism of further improvements. Loans closing within 15 days are
locked, considering today’s movement loans closing within 30 should
contemplate locking in to protect themselves from any future volatility
that may erase today’s opportunity.” –Constantine Floropoulos, Quontic Bank
“October’s jobs report was tepid, and bonds cheered the news. We moved
back to the lower end of the recent range, and those who dared to float
were rewarded. For the moment, I’ll take a floating bias for new loans,
unless clients are more comfortable locking. One of these days, the
range will break one way or the other, only question is which direction
and when.” Ted Rood, Senior Loan Officer
“If you floated through this mornings jobs report, you are being
rewarded. All year long the jobs report has been ignored by the markets
despite very solid reports and today’s was no exception. Helping the
bond rally was some dovish comments from Fed governor Evans and Fed
chairperson Yellen. Long time readers and loan officers know that
lenders are very quick to take away when bonds are selling and very slow
to pass along improvements when they are rallying, and that is holding
true today. I favor floating all loans over the weekend to allow some
time for markets to settle in and lenders to pass along all the gains.” –Victor Burek, Open Mortgage
“After a week worth of data for bonds and mortgages to end the week where
we are, I believe there is a lot of room for optimism. I would
certainly float into next week and see if today’s rally will continue. I
really believe the highs of this week are the highs of the next couple
of weeks. Lower rates ahead.” –Brent Borcherding, brentborcherding.com
Today’s Best-Execution Rates
- 30YR FIXED – 4.0-4.125
- FHA/VA – 3.5-3.75
- 15 YEAR FIXED – 3.25
- 5 YEAR ARMS – 3.0 – 3.50% depending on the lender
Ongoing Lock/Float Considerations
- The hallmark of 2014 has been a narrow range in rates. Too many market participants bet on rates going higher in 2014, and markets punished that imbalance with a paradoxical move lower.
- European markets helped that process along and continue to play a prominent role in keeping US rates lower than they otherwise might be.
- For most of the Summer and early Fall months, rates held a narrow range of 4.125% -4.25% (essentially where the 2014 rate recovery has bottomed out) and finally broke to a 3.875%-4.0% range in mid-October. It’s too soon to tell if this is a brief window of opportunity or the continuation of 2014’s very gradual improvements.
- 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).