Mortgage rates moved quickly back to their recent highs today as investors race to reposition for a perfect storm of risks.  The biggest risk is that European bond markets are changing course after the epic run to all time lows over the past year and a half.  Even if this isn't a major reversal, investors are treating it as a possibility for now.  That means they're getting rid of bond market holdings as quickly as possible, which pushes prices lower and rates higher.  Because US rates are interconnected with European rates, the selling spree is being felt on mortgage rate sheets at home.  Most lenders are back to their highest recent rates, meaning the average conventional 30yr fixed  quote is up to 4.0% for top tier scenarios.

It's important to understand that if the current move really does turn out to be the big bounce in Europe that things could get much worse.  It's equally important to understand that if markets were already firmly convinced of that, things would already BE much worse.  They're not convinced, but they're considering it more seriously than at any other time since the long move toward lower rates began in 2014.  It's a high risk environment in terms of what you can lose by floating.  It's also a high reward for those who float and happen to be right.  For the average borrower, floating here is not worth the risk, as rates could easily move .125% higher on any given day before lenders are even open for locks.

Loan Originator Perspective

"Mortgage rates worsened today and momentum is definitely moving toward higher rates.  I would lock because the selling looks as if it is primed to continue." -Brent Borcherding,

"Our Friday MBS rally fizzled out today, as we lost all of the gains and more.  That's typically not the case following a disappointing jobs report, which makes today's losses even more troublesome.  We're close to the weakest MBS pricing (highest rates) in 3 months now.  This upward rate move has to be respected, and I'm advising my borrowers to lock early, unless they have a serious penchant for gambling and nerves of steel." -Ted Rood, Senior Originator

Today's Best-Execution Rates

  • 30YR FIXED - 3.875%-4.00%
  • 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).