Mortgage rates moved lower again today, making this the 7th straight day where rates have either held steady or improved.  Over that time, no single day stands out as clearly better than the others.  Instead, the gains have been slow, steady, and varied by lender to a greater degree than normal.  Despite the slow and steady pace, the improvement has been meaningful.  Not only are today's rates the lowest in more than three weeks, they also bring 3.875% back into the picture as the most prevalently-quoted conventional 30yr fixed rate.  That said, there are still quite a few lenders at 4.0%.

If things continue to improve, 3.75% will come even faster.  This has to do with the structure of the mortgage-backed-securities (MBS) market, upon which lenders' rate sheets are based.  When a loan is written at 4.0% and 3.875% to a lesser extent, there are few funding options for the lender in terms of what they do with the loan when they sell it or service it behind the scenes.  There are more flexibilities once a loan is written at 3.75%.  That means bond markets don't have to improve as much in order for lenders' rates to drop another eighth of a point. 

That's the optimistic scenario though.  Let's discuss the cautious scenario.  This is the one where I remind you that any time financial markets do one thing for several consecutive days, odds increase exponentially that they'll do something different soon.  As such, it's highly likely that we'll see at least a temporary pull-back from the past 7 days of positivity. 

It remains to be seen if that's a storm to be weathered or a turning point that leads back to higher rates.  In all likelihood, the next dose of near-term momentum will be decided by the important calendar events in the upcoming week.  It continues to be the case that the risk of a bigger move higher in rates outweighs the reward that would result from further improvements.  For what it's worth though, that's a much closer call than it was a few weeks ago.

Loan Originator Perspective

"Month end proved to be favorable to rates and those that floated. I am somewhat concerned that we lose some of these gains next week as we head toward the jobs report. I think it would be wise to go ahead and lock today, especially if closing in the next couple weeks. " -Victor Burek, Open Mortgage


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.   Those risks are being compounded by speculation about the Federal Reserve raising rates by the end of 2015.

  • We're in the middle of the 2nd big, ugly bounce so far this year and once again forced to confront the possibility that this will be a big-picture, long-lasting correction.  Until such a thing can be ruled out, Locking makes far more sense.  That said, the upward momentum in rates during this move has subsided to such an extent that we can say markets are considering their next move. 

  • 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).