April 24, 2015
Mortgage rates barely budged again today, which means they've been able to hold under an important ceiling as we head into next week's Fed Announcement. Given the improvement in underlying market conditions, lenders are playing it safe with rate sheets. This could allow them more flexibility in the event markets improve further at the start of next week. 3.75% remains the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios, though several lenders are at 3.625%. As always, keep in mind that a borrower being quoted one rate almost always has the option to pay more upfront in exchange for a lower rate. Whether or not this makes sense is a matter of personal preference.
In terms of lock/float strategy heading into next week, today was effectively a "pass." That's not a bad thing. In fact, considering what was possible after Wednesday's weakness, holding ground without any further weakness is one of the better potential scenarios. It's also consistent with the longer-term approach to next week's Fed Announcement. Specifically, rates have been in a very narrow range, and should continue to favor that range until Fed day. These circumstances tend to limit the reward for floating. The only decision to be made is whether to lock before Wednesday's Fed Announcement. If you plan on locking, there's no great reason to float between now and then. If you plan on floating through the Fed Announcement (which is always a gamble), there's no great reason to lock between now an then, barring an unforeseen emergency.
Loan Originator Perspective
"Floaters were rewarded this morning with slightly better rate sheets. With the FOMC on tap next week, i think it would be wise to lock in today, especially those loans closing within the next couple weeks. If i was closing in more than a couple weeks, i would be tempted to float through the FOMC next week. If you do, things could get worse before they get better." -Victor Burek, Open Mortgage
"Mortgage Rates improved slightly today but I believe it only provides more reason/opportunity to lock and is not a sign of directional guidance over the next few days. The Fed announces their rate decision next Wednesday and there is a week filled with data and I think we're going to see rates rise in the first few days of next week." -Brent Borcherding, brentborcherding.com
"Rates improved slightly today, as the Durable Goods report showed continued growth weakness. We're still in our well established range, and basically in the middle of it. As I said before, it will take a jolt one way or the other to move rates significantly. One probable motivation is next Wednesday's Fed Statement. References to a foundering economy will help rates, more optimistic rhetoric will hurt us. We sometimes see defensive pricing ahead of the minutes, so today may be the best pricing for the next several days." - Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.75%
- FHA/VA - 3.375-3.5
- 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 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 helped calm the domestic bond market's move toward higher rates. April's weak employment report helped solidify it.
- It's 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 had been creating a lot of volatility, which made for uncertain fluctuations from day to day. But those periods of volatility have been interspersed by utter indecision where rates are effectively drifting sideways with no conviction and no desire to get off the fence. We have yet to see a truly big/scary move higher after 2015's first (and so far "only") big push toward higher rates that ended at the beginning of March. We've been sideways right in between the highs and lows ever since.
- 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).