July 28, 2014
Mortgage rates didn't move much to start the week, with a nearly equal number of lenders moving both higher and lower. On average, rates were just barely higher. Even then, the actual rates being quoted are the the same today versus Friday with the only differences seen in the form of closing costs. The most prevalently quoted conforming 30yr fixed rate remains at 4.25% for flawless scenarios with 4.125% available to a lesser extent.
As the week progresses, so should the movement in the world of interest rates. Mortgages and Treasury yields alike have been bumping around at the lower end of their ranges in 2014. There's a decent chance that this week's events will either help break those ranges, or prompt a bounce back toward higher levels. Bottom line, rates have been low and sideways, but they should look more like they're choosing a direction by the end of the week.
The first major chance for this increased volatility is on Wednesday. There will be several pieces of key economic data as well as a Fed Announcement in the afternoon. As is always the case when we're expecting more volatility, the risks and rewards of floating are increased. That said, rates haven't shown much willingness to move below levels seen in late May. Until/unless they do, and with rates near long-term lows, it's safer to plan on that range continuing.
Loan Originator Perspective
"Locking is the safest course of action before Consumer Confidence (Tues), ADP and GDP (Wed), Initial Jobless Claims and Chicago PMI (Thurs), and NFP on Friday. It's a data packed week that could send rates in any direction, but considering we're at/near 3-6 month lows....the greatest risk is for rates to go up." -Brent Borcherding, www.brentborcherding.com
"With the amount and high importance of the upcoming economic data this week, it is very risky to float. If the data portrays a weaker economy, rates will improve, but if the data portrays a better economy, rates will rise. As many will know, rates will rise far faster than they will ever fall. If you feel the data will disappoint, floating will pay off. But if you feel the data will be as expected or better, than locking is the way go. My advice to my clients is there is much more to risk than to gain by floating." -Victor Burek, Open Mortgage
"“After a fairly contained range for rates this year, this week’s data could be the catalyst that pushes rates one way or the other. Hopefully that direction is down to increase affordability and potentially kick off a refinance mini-boom. If rates move up sharply, the housing market could see more pressure and contraction. Locking is the safe play for sure and improvements can be had thru renegotiations of locks.”" -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.25
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.375%
- 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).