Mortgage rates moved forcefully lower today, bringing them well past previous 2014 lows and back in line with levels not seen since November 19th. Overnight weakness in equities and foreign markets continues to promote strength in US bond markets, including the mortgage-backed-securities (MBS) that most directly influence mortgage rates. This further solidifies 4.375% as the most prevalently quoted conforming 30yr fixed rate for ideal borrowers (best-execution). For some lenders, that rate remains 4.5%, but for the most aggressive lenders 4.25% is a close contender for utterly flawless scenarios. When adjusted for day to day changes in closing costs, rates fell an equivalent of 0.07% today.
Once the sharp move higher in mortgage rates during 2013 topped out in the first week of September, bond markets have been cycling between those highs and corrective lows roughly half a point away. If you look at that phenomenon in terms of 10yr US Treasuries, that's been taking place between 3.0% and 2.5% in general. The analogous range for mortgage rates has been roughly 4.75% to 4.25%.
The first day of 2014 marked the high point in one of these cycles and we've been in the corrective pattern ever since. The question remains: will this instance of correction prove to be just as pronounced as the one ending in late October? Thankfully, if you don't want to try to predict the future, we've already covered so much ground that it wouldn't be a bad idea to take the improvements that are on the table and lock in your rate.
Loan Originator Perspectives
"Best rates in several months today, we're down almost .5% from the worst
rates of 2013. Floaters and those starting loans need to look hard at
locking in gains. If next week's employment report is poor and the
recent stock sell off continues, rates MIGHT improve, but those are
hardly givens. Locking guarantees gains, floating risks them." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
"Today's rate sheets are the best I have seen in months as lenders
finally passed along some of the recent improvements. Lots of important
data next week including non farm payrolls on Friday. I strongly
advise anyone closing within the next 30 days to go ahead and lock in
today." -Victor Burek, Open Mortgage
"Lock 'em up! When it comes to rates, there is always a chance that
rates can go up or go down and right now is no different. However, I
think after what has been some consistent improvement, right now the
odds are greater we see them INCREASE vs decrease. I strongly suggest
taking your gains." -Brent Borcherding, Capital M Lending
" I'm advising to lock in advance of the jobs report next week. This
despite a chance that rates keep dropping due to another bad report.
There's also a chance the report is good and rates still drop. In
either case if rates drop after locking then renegotiate down." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc. NMLS # 107434
Today's Best-Execution Rates
- 30YR FIXED - 4.375%
- FHA/VA - 4.25%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The prospect of the Fed reducing its asset purchases weighed heavy
on interest rates for the 2nd half of 2013, causing volatility and
generally pervasive upward movement.
- Tapering ultimately happened on December 18th, 2013. Markets had
done so much to come to terms with it ahead of time that it essentially
just confirmed the the 6 month move higher in rates, but didn't make for
another immediate spike higher.
- Rates moved gradually higher into the end of 2013 and began to move gradually lower into the beginning of 2014, helped along by a weak employment report on January 10th. This report raised doubts as to whether or not the Fed would continue tapering asset purchases at the same pace, but it was ultimately a flare up in emerging markets and weakness in stocks that fueled bond-market positivity and allowed rates to hit 2014 lows on the same afternoon the Fed reduced asset purchases by another $10bln.
- With that in mind, further interest rate resilience in the face of tapering only looks limited by ability of emerging markets and equities to continue being weak.
- (As always, please keep in mind that our Best-Execution rate always
pertains to a completely ideal scenario. There are many reasons a
quoted rate may differ from our average rates, and in those cases,
assuming you're following along on a day to day basis, simply use the
Best-Ex levels we quote as a baseline to track potential movement in
your quoted rate).