Mortgage rates continued holding mostly sideways today, though there were enough lenders in slightly better shape to make for a small improvement on average. Just keep in mind that things may vary from lender to lender when comparing to yesterday's latest offerings. Some will be worse and a bit more than half will be better. 4.5% remains the most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrowers (best-execution). When adjusted for day-to-day changes in closing costs, rates moved lower by an equivalent of 0.01% today.
For a second straight day, the bond markets that underpin mortgage rate movement had precious little data to motivate movement. While headlines out of the Senate on potential legislation to wind down Fannie and Freddie did have an effect on MBS (the 'mortgage backed securities' that most directly affect rates), it wasn't enough to make for much of a change versus yesterday's rate sheets. It was also somewhat offset by falling stock prices and Treasury yields, which helped MBS bounce back into the afternoon.
Risk and reward for locking and floating are subdued in this environment. If you wait to make your decision beyond today, you're essentially waiting to see if Thursday's economic data will support last week's stronger reading on employment. If it does, rates could once again move to challenge recent highs. Other wild cards include potential Ukraine headlines (which haven't done much to help rates so far this week) and the possibility of further losses in equities (which have been helpful to some extent). Neither of these are high enough probability bets to be worth much risk, but if you're inclined to float, you can simply use the recent highs seen on Friday as a 'stop-loss,' such that if rates move any higher, you'd lock at a loss. The biggest risk to this strategy is that the 'break' could be abrupt if it coincides with strong economic data on Thursday.
Loan Originator Perspectives
"I'm showing rate sheets, just a tad better, which is not unexpected
after last weeks sell off even those pricing is remaining approximately
the same. The chance at a little more stability over night & the
possibility of a good 10 year auction tomorrow, makes floating overnight
a calculated risk that I'm for....though, I'd remain prepared to lock." -Brent Borcherding, Capital M Lending
"Rates improved again this morning, but only modestly. With no important
economic data being released tomorrow morning, and with Ukraine
continuing to be in the headlines I continue to favor floating.
Tomorrow afternoon, we do have a important treasury auction of 10 year
notes which could impact rates. If you float overnight, be prepared to
lock tomorrow at 2 eastern if the auction goes poorly." -Victor Burek, Open Mortgage
"Rates were largely unchanged again. This is much more welcomed than
last weeks increases. Traders appear to be looking for clues before
making a decisive move and this clue may come in the way of Thursdays
Retail Sales numbers. Living in the North East I have seen first hand
how bad this winter has been and do not expect the number to beat
expectations. Floating and waiting for a trend change appears to be a
safe move here. " -Manny Gomes, Branch Manager, Norcom Mortgage
"No reason to be optimistic that rates are going down. Locking is the
safe move unless you are a gambler. Slow economic report week could
lead to some improvement, but not guaranteed and improvement would be
minimal at best." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.00%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- Rates moved gradually higher into the end of 2013 and reversed course with a nice move lower in January 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.
- The Fed has stayed the course on their $10bln per meeting reduction in bond buying, though rates got an ostensible push lower from weakness in stocks and emerging markets. As soon as those moves ran their course, the rate rally bottomed out as well. That bounce has been as low as rates have gone so far this year. Now we're tentatively waiting for the next move.
- Because of the unseasonably cold/snowy weather across much of the country, market participants are hesitant to stray too far from the narrow range carved out during February (because it clouds the validity of the economic data).
- As soon as investors can have more confidence that the incoming data is an accurate representation of economic conditions, we should see more willingness for rates to react accordingly, with weaker data helping keep rates lower and stronger data pushing them back toward January's highs.
- (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).