August 29, 2014
Mortgage rates barely budged today. A few lenders were a bit higher than yesterday. A few more were a bit lower, but most hadn't moved enough to be considered anything more than unchanged. Most borrowers would see the exact same quote today compared to yesterday. 4.125% remains the most prevalently quoted conforming 30yr fixed rate, but 4.0% is as close as it's been since May 28th.
The lack of material improvement in mortgage rates is notable today, considering the underlying markets that most directly affect rates would indicate some improvement. This is one of the few instances where mortgage-backed-securities (MBS) will be in better shape without any noticeable effect on loan pricing. This phenomenon actually isn't that uncommon on the day before a 3-day weekend, and especially when it happens to be the last business day of the month.
Keep in mind that by accepting locks, lenders are increasing the amount of commitments they have in the marketplace. Generally speaking, it's riskier to increase the level of commitment ahead of long weekends, especially when geopolitical risk is a market-moving consideration. Any major change in markets over the long weekend runs the risk of making lenders sorely regret offering locks at what would then be an "out of market" rate come Tuesday.
Loan Originator Perspective
"We're bordering on the best rates of the year, but I say float through the 3 day weekend and into Tuesday. As I think better rates are just ahead, as the pull lower due to global events, European debt, etc is the largest rate indicator right now. Be ready to lock at any time, but I suggest waiting to see what next week brings." -Brent Borcherding, brentborcherding.com
"The lender pricing i viewed opened up worse this morning even though MBS are higher in price which should reflect in better pricing. This is a common occurrence before a 3 day holiday weekend. As a general rule, you should never lock on a Friday before a 3 day weekend. I would recommend to float all loans over the weekend and evaluate pricing on Tuesday morning. " -Victor Burek, Open Mortgage
"Our improvement continued today despite some robust economic data. The best thing about our gains is that they've been steady and slow, rather than huge movements that evaporate as quickly as they arrive. At some point, our range and stability will end, but for the moment it's a great environment for both buyers and lenders. Seems odd to say floating is an option when we're near the best pricing of the year, but it might be for aggressive borrowers. If you're close to closing, or have tight debt ratios/cash to close, lock 'em up, and don't look back!" -Ted Rood, Senior Mortgage Planner, tedroodteam.com
Today's Best-Execution Rates
- 30YR FIXED - 4.125
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25%
- 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).