Mortgage rates ended the day in almost perfectly unchanged territory versus Friday's despite trading levels improving in the secondary mortgage market.  In other words, the mortgage-backed-securities that dictate lender's rate sheets suggested a modest improvement--an improvement that we're not really seeing.  That said, of the few lenders who moved today, most have moved slightly lower.  The most prevalently-quoted conventional 30yr fixed rate remains 3.875% for top tier scenarios, though 3.75% is certainly not unheard-of. 

The rationale for the conservative approach can vary from lender to lender, but several factors are likely in play.  First and foremost, volatility will always hurt lenders' ability to move mortgage rates in proportion to the rest of the bond market.  The higher the volatility, the more expensive it becomes for the lender to protect against changes in rates and consumer decisions with respect to locking and floating.  Although today was a fairly calm session during domestic hours, overnight movement completely reversed a strong move in the opposite direction on Friday afternoon following news regarding the Greek bailout extension.  Today's move was partly based on that bailout extension looking more tenuous after this weekend failed to advance it to its next anticipated step. 

In terms of domestic events, tomorrow is the first of two days of congressional testimony for Fed Chair Yellen.  These testimonies are historically fairly big potential market movers.  While markets are focused on Europe in general, Fed policy at home can still affect rates.  Investors will be looking for clues regarding changes in the pace of Fed policy hinted at in last week's release of the Minutes from the Fed's most recent meeting.

Loan Originator Perspective

"Looks like our benchmark 10 year has found a comfort zone between 2.04ish to 2.15ish. While in that range, i would be comfortable floating but that comes with risks. Rates always rise much faster so a break of 2.15 could get very ugly very quick while a break below 2.04 will take time for lenders to pass along gains. " -Victor Burek, Open Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 3.75-3.875
  
• FHA/VA - 3.25-3.5
  
• 15 YEAR FIXED -  3.00-3.125
  
• 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 has been and continues to be Europe.
  
  
• European bond yields trended constantly lower in 2014, thus playing a prominent role in keeping US rates lower than they otherwise might be.  Many feel that Europe will continue to slide until their central bank engages in US-style quantitative easing.  Some see this happening in early 2015.  In any event, we're looking for a turn in Europe, first and foremost, before worrying about the longer-term trend in bond markets being at serious risk of reversing.
  

• It's impossible to know when Europe will turn a corner, and even then it's only the sort of thing we'll be able to observe in hindsight.  That means every head-fake toward higher rates runs the risk of developing into a longer term rise, even if those risks vary greatly in terms of probability.  Clients with longer term time horizons and who otherwise don't mind losing some ground in exchange for the chance at locking even lower rates are the only ones who should float.  Clients who must close by a certain date or who can't afford to lose any ground on rates should generally be locking even though the longer term trend has been in their favor for over a year now.
  
  
• 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, 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).