Mortgage Rates bounced higher today, bringing them back in line with the pervasive range of the past several weeks.  As of yesterday, rates were technically at 2-week lows.  

The ultra-narrow range continues to be an important caveat for any discussion of rate movement.  Simply put, there is such a small gap between 2-week highs and 2-week lows that it could be easily traversed on an average day of movement.  Most lenders continue to offer conventional 30yr fixed quotes around 3.375% on top tier scenarios.

Today's chief concern for bond markets (which underlie mortgage rate movement) was European Central Bank (ECB) chief Mario Draghi, who stopped short of promising an extension of the central bank's bond buying program set to end in March 2017.  The program is similar to the Fed's past efforts with several iterations of QE (quantitative easing).  

Simply put, central banks buy lots of bonds.  This makes other investors want to buy bonds too, and the more bond buying that's going on, the lower it pushes rates.  Investors have already accounted for the ECB buying bonds through March 2017, and some investors expect the program to be extended.  If it's not extended, those investors SELL bonds, which puts upward pressure on rates.

While the underlying cause and effect is somewhat complex, the implications are simple.  Rates were falling nicely over the past 2 days and now they're back at risk of breaking higher.  Until such a break can be ruled out, locking makes most sense.

Loan Originator Perspectives

Yesterday may have fooled us, or perhaps today is the bluff, but at the end we are still within the recent range.  Locking loans with a closing of inside of 3 weeks is my current recommendation, with a very small tolerance for floating loans between 3-6 weeks of a closing.  If the range breaks, rates will pop, not worth the risk.  -Gus Floropoulos, VP, The Federal Savings Bank

Rates took a step back today worsening after the ECB announced no new bond buying programs.  We're threatening to break 10 year treasury's recent yield ceiling (1.6%), and if we do convincingly, who knows where we'll end up.  It's likely pricing will recover in the next few days, but if you can't afford to lose, don't gamble, lock and don't look back.  Current pricing is still close to the year's best.  -Ted Rood, Senior Originator

Today's Best-Execution Rates

  • 30YR FIXED - 3.375 - 3.5%
  • FHA/VA - 3.0 - 3.25%
  • 15 YEAR FIXED - 2.75%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • In the biggest of pictures, "global growth concerns" remain the driving force behind the long-term trend toward lower rates
  • Amid that trend, periodic corrections toward higher rates can and will happen.  These can happen for no apparent reason, or they can be brought on by changes in expectations surrounding central bank policy at home and abroad, as well as geopolitical and systemic risks

  • Time horizon and risk tolerance are 2 variables to consider when it comes to locking.  If you have plenty of time and don't mind losing some ground, set a limit as to how much higher rates could go before you'd lock to avoid further losses, and then float in the hopes of never seeing that limit.
  • In the shorter-term, it's always good to look for lock opportunities after rates have been moving lower or sideways repeatedly, especially if they've since begun to move back up in any sort of consistent way. 
  • 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).