August 11, 2014
While mortgage rates didn't enjoy as strong of a move lower as US Treasuries last week, they were nonetheless right in line with their best levels since late June. Any time bond markets make an abrupt move to highs or lows, there's a risk that the subsequent move will be a correction back in the other direction. This is the case even if the longer term trends remain unchanged. It's also especially true in cases where the market movement is fueled by unscheduled headlines, such as those surrounding the various geopolitical conflicts around the world last week.
In short, with Friday seeing a small bounce back toward higher rates, there was a risk that we'd turned a corner. Refreshingly though, markets held their ground fairly well today, and many lenders are unchanged from Friday's latest levels. On average, rates are only modestly higher. The most prevalently-quoted conforming 30yr fixed rates for top tier borrowers remains 4.125% with 4.25% almost equally as common.
Loan Originator Perspective
"We're holding strong at the bottom of a long term range, and the simple fact that we didn't bounce higher should lend some confidence that lower rates MAY still be ahead. However, it's still a very risky proposition until a strong move lower actually takes place. I would lock for two reasons. If the highest probable outcome plays out and rates move higher, you'll have protection. If rates move lower, however, I believe it's going to be a strong move lower through this long term trend line and there will be ample opportunity to renegotiate and/or "float down." -Brent Borcherding, brentborcherding.com
"Given the lack of strong follow through to better mortgage pricing from here it seems the risk of a move higher in rates outweighs the potential for lower rates. This is especially the case with apparent improvement in economic data that may show signs of momentum. That being said, geopolitical risks remain, and we've been fooled more than a few times with what seems to be better data so my recommendation remains the same. Short term closings should lock and longer term closings must go by your risk tolerance." -Hugh W. Page, Mortgage Banking Officer, M.B.A.
"Rates logged slight improvements today over Friday's close, good to hold our ground. Once again appears that Ukrainian Drama may be growing, which helps generate demand for MBS (and lower rates). We'll know more about the strength of this rally after Wednesday's 10 year treasury auction. Lock/float now back to neutral in my eyes. No harm in locking at current great rates, but some potential for further improvements if geopolitical unrest grows. At any rate, make sure your loan officer knows your goals and is monitoring the MBS market!" -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"I was prepared to see mortgage bonds slide today and higher rates as a result. I'm pretty happy to see that did not happen and we had a rather flat day instead. I would like to see an up day tomorrow for mortgage bonds to make me feel comfortable with floating. Unless we see Russian troops moving back towards Ukraine locking may be your best bet for rates can shoot up in hurry if the market feels the pressures of geopolitical events dissipate." -Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.125-4.25
- 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).