July 7, 2015
Mortgage rates put in a more mixed performance today, owing to volatility in underlying markets. The day began well, following overnight improvements in global bond markets. To oversimplify, investors were guarding against risk by selling stocks and buying bonds. Excess demand for bonds leads to higher prices and lower yields. Mortgage-backed-securities (MBS) are a major part of the bond market in the US, and when Treasury yields are moving lower, mortgage rates tend to follow. That said, mortgage rates don't always follow in lock-step, especially when Treasuries are moving in response to global economic risks like those at center stage in Europe.
Overnight gains were enough to push rates to their lowest levels of the month this morning. At that point, a majority of lenders had moved down to quoting conventional 30yr fixed rates of 4.0% for top tier borrowers. But after European markets closed, US markets showed their true colors. The previous gains in MBS were mostly erased and lenders recalled rate sheets in droves (meaning they raised rates in the middle of the day). The silver lining is that this afternoon's rates are still a bit better than yesterday's. Several lenders are still quoting 4.0% though many moved back up to 4.125%.
This type of intraday movement is par the course recently, and it's not going away any time soon. Whether it's driven by domestic events such as tomorrow's release of the Minutes from that last Fed meeting, or by several days of negotiations over a new Greek bailout that follow, volatility is the only safe bet. For the past three business days, that volatility has generally left mortgage rates in better shape, but until we see a more stable change in market behavior, it's safer to treat such days as "lock opportunities" as opposed to promises of further improvement.
Loan Originator Perspective
"Mortgage Rates Improved, again, today. There is no doubt that this could turn out to be a great day to lock, specifically, if these improvements turn out to be short lived and rates rise, again. That said, I would cautiously float into tomorrow morning. There is not one singular event that is potentially leading to these improvements, in fact there are several economic issues leading to this good fortune in rates. Float to see if we continue this break lower, but be ready to lock tomorrow morning if this price action is not confirmed." -Brent Borcherding, brentborcherding.com
"Rates have been behaving like a bouncing ball rolling up a hill for most of if not all the second quarter of this year. Today it appears that ball may have finally run out of momentum and may possibly roll back down the hill. That roll back may come in the way of Greece for up until now the market has been pricing is some sort of resolution or possibly even a kick of the can but if that does not happen and talks fall apart we may see a Grexit quickly price into the market and that will help bring down rates. That being said no one can tell the future and if you are happy with your current pricing than lock it in and take risk off the table. " -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.0%-4.125%
- FHA/VA - 3.75-4.0
- 15 YEAR FIXED - 3.25%-3.375%
- 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. There is much debate over whether or not the global economy is turning a corner, thus justifying a widespread move to higher rates. That's made 2015 significantly more volatile than 2014 for markets. This means lender rate sheets may change appreciably from day to day, and sometimes even several times in the same day.
- Bottom line: European Quantitative Easing helped push global rates to all-time lows in April. Now, the big risk for mortgage rate watchers is that we might have turned a long term corner. That risk is being compounded by speculation about the Federal Reserve raising rates by the end of 2015.
- May and June have amounted to the 2nd major move higher bounce so far this year. Every time this happens, we have to consider 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.
- 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).