Mortgage rates are having a rough couple of weeks.  Yesterday saw rates approach the previous 2015 highs set on March 6th.  Today's rates moved slightly higher still, setting a new 2015 high.  The average lender is now quoting conventional 30yr fixed rates of 4.0% on top tier scenarios, though 3.875% is still available in some cases.  This is a substantial increase from the 3.625% rates seen just a few short weeks ago.  Normally, we'd be measuring changes in terms of closing costs when looking at rates over these periods of time (because the closing cost side of the equation changes every day whereas contract rates can go weeks without moving).

On a somewhat ominous note, the economic data that might have helped us today turned out to go mostly unnoticed.  The ADP Employment report is an important early indicator for Friday's much more important employment data.  Typically, if markets are anxious about the data, ADP numbers can really get things moving if they're much better or worse than expected.  Today's figures were weaker, coming in at 169k vs a median forecast of 200k.  Historically, that would be weak enough to help, but the bond markets that underlie mortgage rates never even made it back into yesterday's range. 

While there are several ways to justify the disregard for the data, the takeaway is that there is pervasive momentum pressuring rates higher.  It has been and continues to be the case that this is not the sort of move where we should casually assume things will get better.  While that is indeed possible, it's also possible that things continue to get worse.  The amount of ground we stand to lose is not worth risking on the chance to catch a falling knife.

Loan Originator Perspective

"I'm sounding like a broken record, but we lost ground again today in rate markets.  My initial pricing today was down from yesterday's, and we (like most lenders) issued worsened rate sheets mid day.  I've been recommending borrowers lock as early as possible in the loan process, and that advice isn't changing.  My pipeline is 100% locked, and until the upward rate trend reverses, there's no reason to change that strategy.  " -Ted Rood, Senior Originator

"There was a lot of selling going on as both stock and bonds once again got clobbered.  The market appears to have disregarded the bad ADP number today and is positioning themselves ahead of Fridays NFP number.  We can see this as a better than expected number may already be priced into the market and if that is the case rates truly should not increase to much higher.  On the flip side if the number disappoints we may have a nice rally on our hands.  This leaves floating the best course of action from a risk/reward perspective.  " -Manny Gomes, Branch Manager Norcom Mortgage

Today's Best-Execution Rates

  • 30YR FIXED - 3.875-4.0%
  • FHA/VA - 3.75
  • 15 YEAR FIXED - 3.125-3.25
  • 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.

  • 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 had been creating a lot of volatility, which made for uncertain fluctuations from day to day.  But those periods of volatility have been interspersed by utter indecision where rates are effectively drifting sideways with no conviction and no desire to get off the fence
  • 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 helped calm the domestic bond market's move toward higher rates.  April's weak employment report helped solidify it.

  • Unfortunately, this didn't result in a strong move past the year's previous lows.  In fact, rates at home and abroad hit a floor of sorts and flat-lined.  They've begun moving higher at a quick pace, and we're once again forced to confront the possibility that this will be a bigger, longer-lasting correction.  Until such a thing can be ruled out, Locking makes far more sense.

  • 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).