July 22, 2014
Mortgage rates were unchanged in most cases today, though some lenders were slightly worse. Even then, the difference from yesterday is generally insignificant. MBS (the mortgage-backed securities that most directly influence rates) digested two economic reports today: the Consumer Price Index (CPI) and Existing Home Sales.
CPI is an inflation metric, and although it's done very little to move bond markets (which include MBS) for several years, that's beginning to change as investors weigh the timing of the Fed's first rate hike. While the Fed Funds Rate doesn't directly affect mortgages, it's ability to indirectly affect nearly every corner of the financial market is undeniable. Today's data showed inflation slightly softer than expected, which helped lenders keep rate sheet offerings on par with yesterday's. Had it not been for the CPI data, rates would likely have been higher.
Existing Home Sales had the opposite effect. Stronger than expected results caused some weakness in MBS, but it wasn't enough to offset the earlier improvements and lenders were not forced to raise rates mid-day. 4.125% remains the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios. Any changes in quotes from yesterday would only affect the closing costs, and even then, they'd be minimal.
Loan Originator Perspective
"Another flat day for bonds today. We are still hovering over the lower end of the current range and unless we break out of this range to the downside the risks of floating increase with each passing day. If you are closing in the coming week or so two lock your loan. " Manny Gomes, Branch Manager, Norcom Mortgage
"The benchmark 10 year note continues to hang around 2.47 which has been the bottom of our range for quite some time. With that resistance continuing to hold, locking here is the wise move. Pricing today is slightly worse than yesterday but some lenders have already repriced for the better. If locking today, hold off until as late as possible to give your lender time to pass along today's improvements." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.125
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The hallmark of 2014 so far has been a disconcertingly narrow range in rates. Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower.
- As of June, rates were officially lower year-over-year, but that's due to rates' path higher in 2013. The current path in 2014 remains sideways.
- European markets continue to play a nagging role in the background, generally helping rates in the US remain lower than they otherwise might be.
- From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range. A rally into late May stood a chance to act as this break, but rates have since returned to what were previously the lower limits of the 2014 range.
- 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).