March 25, 2014
Mortgage rates were slightly higher for some lenders today, but lower for others--holding perfectly flat on average. There were no major disruptions in financial markets today, but morning rate sheets were in slightly higher territory before weak economic data helped bond markets improve mid-morning. Occasionally, when bond markets improve enough during the day, lenders will adjust rate sheets (aka "mid-day reprices").
Only a few lenders repriced today and the changes weren't significant--just enough to keep the end-of-day average right in line with yesterday's. The most prevalently quoted conforming 30yr rate for top-tier scenarios (best-execution) consequently remains at 4.5%. It was closed to moving up to 4.625% last week.
As mentioned above and as we often discuss, mortgage rate movement is primarily a factor of the daily trading activity in bond markets. While US Treasuries do more to set the general tone for domestic bond markets, it's mortgage-backed-securities (MBS) that most directly affect lenders' rate sheet offerings. With that in mind, bond markets are clearly looking for guidance before making their next pronounced move, and clearly haven't found it yet.
The last pronounced move was just last Wednesday after the FOMC Forecasts showed a consensus for a slightly earlier Fed rate hike and a slightly higher rate by the end of 2015. Rates didn't move any higher after that, but neither have they moved significantly lower. Stronger prospects for inspiration are on the horizon next week, but the current week remains anyone's guess. In general the risk and reward for floating and locking are both subdued in this environment.
Loan Originator Perspectives
"Not much news today and little appears to have changed. Floating still has the opportunity to pay dividends, as this does appear to be the top of the range. However, as a reminder, when you're this close to the edge, you can go over it very quickly. Float with caution, but be ready to lock." -Brent Borcherding, Capital M Lending
"Like yesterday, rates opened a little worse than the prior day. As the day progressed, rates moved back to yesterdays level allowing many lenders to reprice for the better. If you are within 15 days of closing, I would favor locking, but longer term loans might want to consider floating to see if rates can rally further." -Victor Burek, Open Mortgage
"With the recent volitility in the market, it is smart to lock your loan early on in the process with a lender that offers a renegotiation or float down option." -Kent Mikkola, Mortgage Consultant NMLS#353976, M & M MOrtgage, LLC NMLS #213677
"Modest improvement this afternoon in both treasuries and mortgage rates. We're still within yesterday's ranges, not breaking any new ground here. Looks like "the range is the range until it isn't anymore" still applies. Tomorrow's data includes durable goods and a 5 year treasury auction, both of which can influence rates. No EuroDrama today to date, so the fact we retained yesterday's gains is a good thing!" -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.00%
- 15 YEAR FIXED - 3.5%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The Fed has stayed the course on their $10bln per meeting reduction in bond buying, though markets have handled it relatively calmly compared to the days of "coming to terms with tapering" in 2013.
- Rates fell significantly in January, leveled-off in February and have been taking choppy steps higher in March
- Some mitigating factors had kept rates from moving too far out of a narrow range, including the uncertain impact of weather on recent economic data as well as geopolitical risk surrounding Ukraine
- As soon as investors can have more confidence that the incoming data is an accurate representation of economic conditions, we should see more willingness for rates to react accordingly, with weaker data helping keep rates lower and stronger data pushing them back toward January's highs.
- That confidence is increasing in March with a strong jobs report and more aggressive forecasts on rate hikes from the Fed. Ukraine has offset that somewhat, but the general trend continues to be toward higher rates.
- (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario. There are many reasons a quoted rate may differ from our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).