August 19, 2014
Mortgage rates continued moving higher today after headlines suggested a chance for deescalation in Ukraine. It was the geopolitical risk in Ukraine that coincided with a strong move lower on Friday. Strong economic data also contributed to the weakness as a report showed Residential Construction rose at the fastest pace since November. Economic strength tends cause investors to sell bonds and move to riskier assets. When bonds--like those that dictate mortgage rates--are sold, rates move higher.
Today's move completely undoes last week's improvement. That said, most of that improvement was seen on Thursday and Friday, so it's not quite as dramatic as it might seem. In fact, with the exception of the last three days, today's rates are still the lowest in over a month. The most prevalently-quoted conforming 30yr fixed rate remains 4.125% for the best scenarios. 4.25% is still quite common and 4.0% is fading from view.
Loan Originator Perspective
"Rates headed higher today as mortgage bonds gave up more gains this week. The only silver lining is we are near a point where prices have support which should prevent more selling. We however have the Fed meeting this week which can move things in a hurry. Locking still makes the most sense given the potential market moving data which will be released this week. It is always less painful to be locked wishing you were floating than to float and wishing you were locked in." -Manny Gomes, Branch Manager, Norcom Mortgage
"You simply cannot go wrong by locking at this level. We're right on the edge of a potentail move higher, and these are the best rates we've seen in about a year. Locking right now protects you against a potential move higher, while capturing the best rates in the last 12 months. What's not to like about that? " -Brent Borcherding, brentborcherding.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).