March 27, 2015
Mortgage rates had one of their least exciting days of the week today, moving just modestly lower from yesterday's latest levels. The trading range in underlying markets was exceptionally narrow, especially when compared to the week's previous activity. The final revision of 2014's 4th quarter GDP was released this morning, but it was close to forecasts and didn't produce much of a reaction. Fed Chair Yellen spoke in the afternoon, saying that a rate hike would indeed likely be warranted in 2015. By now, this is old news for financial markets. Few, if any, eyelashes were batted.
3.75% remains the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios. For the lenders that moved up to 3.875% yesterday, today's modest gains didn't bring them any lower. The only improvements were seen in the form of closing costs. Even then, several lenders are actually worse off today, despite trading levels improving.
With 2 ugly days of weakness mid-week and today's much calmer session, it's fair to wonder which of the recent trends will be in control as we begin the upcoming week. Ultimately, the momentum will likely be decided by next Friday's big jobs report. While there could be some volatility between now and then, today's trading suggests that the past 2 days of weakness amounted to a quick move to get into position for next week. It allows traders/investors to approach the important data from a more nimble spot in the recent range, with room to run either higher or lower depending on the data.
Loan Originator Perspective
"Lender rate sheets are slightly improved over yesterdays last sheets. As i mentioned, during sell offs, lenders tend to take away more than the price drop justifies. They do this incase the selling continues. I favored floating over night yesterday and i also favor floating over the weekend. The benchmark 10yr was able to hold below 2.00 yesterday, so it seems like we have good support over head and plenty of room to run back down to the 1.85 area. If you do float over the weekend, be in touch with your lender early Monday to evaluate pricing."-Victor Burek, Open Mortgage
"Bonds finally found support levels today, as our losses turned to moderate gains. I wouldn't want to call it a rally just yet though. There's more chatter from Germany over Greece's willingness to enact fiscal reforms, and the more drama there, the more rates here will benefit. I'm still in a "lock earlier rather than later" mode, but that could change next week, if rates continue improving. " -Ted Rood, Senior Originator
"The sell off in mortgage bonds was stopped by strong support levels. We now have get back above a key resistance level before we can see pricing improvement and lower rates. Janet Yellen is set to speak just before the closing bell today and that can stir things up a bit. The last time she spoke rates fell hard. Lets hope the same thing happens today. Risk/Reward favors floating over the weekend. " -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.75-3.875
- FHA/VA - 3.5
- 15 YEAR FIXED - 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 was Europe and the introduction of European quantitative easing.
- 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. There was a possibility that the bounce occurred in February, but European bonds got back to the task of improving in March. This has helped calm the domestic bond market's move toward higher rates.
- While more immediate, bigger-picture disaster has been averted, it's still 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 creates a lot of volatility, and volatility is bad for mortgage rates. One result is that they have a slightly harder time keeping pace with movement in Treasuries. That can be good or bad, depending on which way markets are moving. The other result is that there really is no way to be sure that today's rates will be available a few hours from now. They could get better or worse, but the point is that there's more change and movement in the mortgage market so far in 2015.
- 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).