Mortgage rates did as expected and departed their recently more stable range today.  Unfortunately, we got the less enjoyable of the two potential departures with rates moving higher at a moderate pace.  At the same time, the world's most widely-followed weekly check on rates from Freddie Mac indicated a move in the other direction!

The discrepancy is a result of Freddie's survey methodology.  It's not that the data is inaccurate--simply stale.  Here's what it means when Freddie says rates were lower this week: Human survey respondents chiming in at some point between Sunday and Monday this week reported lower rate quotes to Freddie than they did at some point between Sunday and Wednesday last week.  Given that Freddie tells us they receive more responses earlier on in their survey periods AND that last week's big move lower in rates didn't happen until Wednesday, it makes sense that the numbers could come out lower this week.

But again, this has nothing to do with the reality in place at the time this news is being widely distributed!  Rates are unequivocally higher today than on any other day during the past 2 weeks.  Whereas 3.875% has been at least a contender, if not a sure thing on all of those days, 4.0% is now clearly in control as the most prevalently-quoted conforming 30yr fixed rate for top tier borrowers.  Some lenders may already be looking at 4.125%. 

All that having been said, rates are STILL lower than at any other time in 2014 with the exception of the past two weeks.


Loan Originator Perspective

"I still strongly favor locking, until we see another strong move lower in rates confirming a downward trend will continue...the highest likelihood for interest rates is that they'll move higher. " -Brent Borcherding,

"We expected a move in one direction or the other, unfortunately it wasn't the way we wanted. I am carefully watching 2.34 on 10 YR yields to hold as our support. If we cross that threshold my bullish optimism will shift. Until then, I am only locking loans cleared to close." -Constantine Floropoulos, Quontic Bank

"Today's action in the markets shifted my bias to locking all loans closing within 15 days and possibly within 30. While it is somewhat apparent that the longe term trend of lower rates might well be intact, in the short term (and no one knows for sure what short term really means) I believe we will be worse off in rates. Lots of market moving events coming up the next two weeks so a return to volatility is possible." -Hugh W. Page, Mortgage Banker, Seacoast National Bank

"Next week is Fed week and the volatility is sure to continue. I would not be surprised to see stocks give up some gains and mortgage bonds benefit from those loses in the coming weeks. For now if you have not locked and your closing is around the corner go ahead and lock. If you have weeks before closing I would wait for the market reaction to the Fed meeting before making your decision." -Manny Gomes, Branch Manager Norcom Mortgage


Today's Best-Execution Rates

  • 30YR FIXED - 4.0
  • FHA/VA - 3.5
  • 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).