November 5, 2014
Mortgage rates continued their now incessant trend of exceptionally small day-to-day movement, rising only marginally today and remaining in the recent range. That said, they're near the higher limits of that range. While that's unpleasant on some level (like the one where you compare it to mid-October rates), any day of rates out of the last 28 is still better than any other day in 2014. The most prevalent conforming 30yr fixed rate quote is still hovering between 4.0% and 4.125% for the best-qualified borrowers.
The lack of movement makes for a limited risk/reward environment when it comes to locking and floating. All we can know with certainty is that the past 3 weeks have been very gentle and very bad for rates (meaning that most days have seen rates move higher, but not by very much on any given day) and that upcoming events increase the odds of volatility. These include the European Central Bank's policy announcement and press conference tomorrow morning followed by the Employment Situation Report on Friday.
Loan Originator Perspective
"Important technical levels are still in play. Until we see a move higher on closing yields I am still banking on better rates in the immediate near term. Due to the potentially large market moving announcements flowing in over the next couple of days between our employment #'s on Friday & the ECB tomorrow, I have locked all loans closing within 10-15 days." -Constantine Floropoulos, Quontic Bank
"We seem to still be in a holding pattern until important data is released the rest of the week (Jobs Report and ECB Rate Decision). Although in my view it seems the bias in rates is to drift higher unless something comes out that strongly pushes the momentum lower. I would be locking pretty much everything right now" Hugh W.Page, Mortgage Banker, Seacoast National Bank
"With the ECB announcement tomorrow and non farms payroll on Friday, floating is extremely risky. I suspect we will get the same ole same ole from the Draghi. He stands ready to act but markets will be disappointed as he will not announce the purchase of sovereign debt the markets so very much want. Regarding payrolls, historically, the jobs report has always been a market mover. We have had quite the run of solid jobs reports which would lead you to believe rates are moving higher, yet rates are close to a year and a half low. Market particapants are shrugging off the good jobs reports due to all the surrounding noise from the slowing global economy and Friday's job report will not change that fact. I think this report will also be ignored, but it could generate quite a bit of volatility on Friday. I think floaters will be rewarded, but it might take until next week to reap the benefits. As always, if you are happy with the current terms being offered, nothing wrong with locking here and removing all risk. Only those who can afford a higher rate and payment should consider floating." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.0-4.125
- FHA/VA - 3.5-3.75
- 15 YEAR FIXED - 3.25
- 5 YEAR ARMS - 3.0 - 3.50% depending on the lender
Ongoing Lock/Float Considerations
- The hallmark of 2014 has been a narrow range in rates. Too many market participants bet on rates going higher in 2014, and markets punished that imbalance with a paradoxical move lower.
- European markets helped that process along and continue to play a prominent role in keeping US rates lower than they otherwise might be.
- For most of the Summer and early Fall months, rates held a narrow range of 4.125% -4.25% (essentially where the 2014 rate recovery has bottomed out) and finally broke to a 3.875%-4.0% range in mid-October. It's too soon to tell if this is a brief window of opportunity or the continuation of 2014's very gradual improvements.
- 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).