Mortgage rates improved for a second day, and ended at their lowest levels for a second straight week.  The most prevalent conventional 30yr fixed quote remains 4.0% for top tier borrowers, but several lenders moved down to 3.875%.  Additionally, the less aggressively priced lenders have rejoined the pack after moving up to 4.125% on Wednesday. 

Today is interesting in several regards.  These mainly have to do with stark differences juxtaposed with striking similarities to last Friday.  Both days tied for the biggest single-day improvement in the past 2 months.  Bother days were preceded by Thursdays with exactly the same amount of improvement.  Both of these Thu/Fri combos were the only positive days in May.  In short, they have a ton of similarities.  That's scary because last time around, Monday ended up being bad. 

While this Monday could be bad too, the two examples are different enough that there's not necessarily a reason to expect that.  There's never a guarantee that the past will continue to repeat itself.  If anything, it's a good reminder of what CAN go wrong.  Locking ASAP will always be the best policy for those who don't want to take those risks.  In general, however, we have a better shot of these improvements signaling that rates are at least going to THINK about consolidating here.  In other words, this is our best chance to see the end of 3 weeks of pain.

Loan Originator Perspective

"We've had a nice rally for a few days after getting hit hard and losing substantial ground.  While economic data of late has been less than stellar, I still don't trust this short term rally and I would be locking up anything closing in the short and maybe even medium term.  For anything closing beyond 30 days, if you choose to try and wait for better pricing, I would do so very cautiously with my loan officer on speed dial for a quick rate lock if markets decided not to be happy anymore." Hugh W. Page, Mortgage Banker, SeacoastBank

"Bonds improved today, and we saw numerous lenders improve rates (20 as of mid PM).  It's encouraging to see the gains, now the question is where do we go from here.  I'd be willing to float loans this weekend, given an informed borrower with some risk tolerance, but there's certainly no shame in locking at our best pricing in a week either." -Ted Rood, Senior Originator

"Another successful float overnight!  It sure seems like the trend is shifting, but these gains could disappear quickly.  Data continues to disappoint, so hopefully this is pushing a fed rate hike off into the future.  I continue to favor floating as lenders still havent passed along all the gains of the last couple days.  Considering the past month and how quickly things can turn, not sure i dont blame them." -Victor Burek, Open Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 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).