Mortgage rates moved only moderately higher today, but it was enough to bring them to April's worst levels.  The bond market trading that underlies interest rates in the US has been an increasingly volatile place.  This has made for more frequent medium-sized moves in both directions.  Unlike some of the simpler periods of time in the past where economic data determined the trading direction for the day, the current situation puts more emphasis on trading itself as a source of inspiration. 

In other words, traders moved toward higher rates today because that was the direction that other, bigger traders were moving.  In terms of actual events that could have motivated this, the best case to be made is that markets tend to push rates a bit higher ahead of Treasury auctions, and today was the last Treasury auction of the week.  Normally, that plays out on a small enough scale that it's not noticeable as far as mortgage rates are concerned.  That wasn't the case today, largely because investors still weren't enticed to buy 30yr bonds very aggressively, despite the higher yields afforded by the morning's rise in rates. 

The lower the demand for bonds, the lower the price, and the higher the yield.  30yr Treasury bonds don't dictate mortgage rates, but they are interconnected and tend to move in the same direction.  So as the 30yr bond moved higher in yield quickly, mortgage-backed-securities (which actually DO dictate mortgage rates) moved higher in yield at a slightly less intense pace.  Still, it was enough for most lenders to adjust rate sheets higher in the middle of the day.  This leaves the average conventional 30yr fixed quote at 3.75% for top tier borrowers.

Loan Originator Perspective

"MBS markets endured a weak 30 year bond auction today, and trended slightly higher.  I'm seeing more change in the pricing for any given rate, than rate changes themselves.  We're still hanging around prior rate ranges, but momentum is not our friend at the moment.  I locked a couple of loans for conservative borrowers, floating one for a client who's willing to risk current pricing for potential gains.  I can't fault anyone who chooses to lock now, given MBS' recent weakness." -Ted Rood, Senior Originator

Today's Best-Execution Rates

  • 30YR FIXED - 3.75
  • FHA/VA - 3.25-3.5
  • 15 YEAR FIXED - 3.00-3.125
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • 2015 began with a strong move to the lowest rates seen since May 2013.  The catalyst was Europe and the introduction of European quantitative easing.

  • With European QE having now begun, we're on high alert for a big picture bounce in European economic data, sentiment, growth, and rates.  The more it looks like such a bounce is taking hold, the greater the risk that domestic bond markets and mortgage rates will also experience a big bounce higher.  There was a possibility that the bounce occurred in February, but European bonds got back to the task of improving in March.  This has helped calm the domestic bond market's move toward higher rates.
  • It's a highly uncertain time for global financial markets.  On the one hand, some believe we're in the midst of a race among world central banks to devalue currencies and lower interest rates.  Others believe that the global economy is turning a corner and rates will grind higher.  That creates a lot of volatility, and volatility is bad for mortgage rates.  One result is that they have a slightly harder time keeping pace with movement in Treasuries.  That can be good or bad, depending on which way markets are moving.  The other result is that there really is no way to be sure that today's rates will be available a few hours from now.  They could get better or worse, but the point is that there's more change and movement in the mortgage market so far in 2015.

  • 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, conventional 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).