Mortgage rates improved again today despite stronger-than-expected economic data. When economic reports are better than forecast, rates tend to move higher, but geopolitical tensions are currently weighing on markets to some extent, especially since last Thursday. In fact, today's rate sheets fell back almost perfectly in line with Thursday's latest offerings. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains 4.25%. Many borrowers will see today's improvement only in the form of lower closing costs (equivalent to 0.03% in terms of rate).
As was the case on Friday, today's market movements don't really tell us anything new. Rather, they simply reiterate the fact that the push toward higher rates from late May has run its course. That doesn't mean rates couldn't continue higher--simply that we're waiting for the next trend to develop. In the meantime, the range of movement has been very narrow, making for lower risk and reward for floating. That said, rates are still much closer to recent lows than they usually stay after historically similar bounces, which is ample justification for those inclined to lock.
Loan Originator Perspective
"Not much movement in rates today. We have a potentially market moving
event on Wednesday with the FOMC of the Federal Reserve meeting and
releasing its decision on rates, QE, and forward guidance policy as well
as updating economic projections for the future. While it's likely the
status quo will be maintained surprises are never out of the question
with these meetings so stay tuned in to events. Lock decisions should
be driven by your risk tolerance with a bias towards locking in the
short term." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"If you floated over the weekend, you were rewarded today with slightly
better rate sheets. The week ahead is packed with potentially market
moving data with the most important release being the FOMC statement and
Economic Projections Wednesday afternoon. Unless the data tomorrow
varies greatly from expectations, I feel we might move sideways for the
next couple days. We also have wild cards with geopolitical issues
around the globe with Iraq, Syria and Ukraine to name a few that could
cause a flight to safety trade which would help rates improve. Nothing
wrong with locking in current rates, but I don't see a need to rush and
lock tonight." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.25%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The Fed has stayed the course on their $10bln per meeting reduction in bond buying, though markets have handled it relatively calmly compared to the days of "coming to terms with tapering" in 2013.
- Rates fell significantly in January, leveled-off in February and took choppy steps higher in March. From there, they settled into a flat range mostly consisting of 4.375 and 4.5%, but with occasional forays to 4.25 and 4.625%.
- The bias had been very slightly toward higher rates, it reversed course in early April as expectations grew concerning European Central Bank easing. On several occasions, those expectations would go on to overwhelm domestic economic data--normally the main source of guidance for market movements.
- As of the third week in May, rates were as low as they've been since June 2013, more than confirming a break below the 2014 range. They remained in that range through month-end and grew more volatile ahead of the June 5th European Central Bank Announcement.
- Looking back at recent movement, it's had a disconcertingly small amount to do with 'normal stuff' like economic data and Fed policy. Temporary and unpredictable factors currently account for too much of the movement to make firm bets on rates moving either direction in the short term.
- (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).