August 4, 2014
Mortgage rates held their ground over the weekend, with most lenders offering the exact same rates and costs as Friday afternoon. There were no significant events or headlines that had any major effects on the bond markets that underlie mortgages. For top tier scenarios, the most prevalently-quoted conforming 30yr fixed rate remains fairly well split between 4.125 and 4.25.
Last week's market movements were volatile at times. This was widely expected, but less foreseeable was an almost perfect lack of change from the beginning of the week to the end. That means that although Friday ended on a positive note for rates, it didn't break any new ground vs recent lows. Until and unless that happens, floating is riskier than normal.
Loan Originator Perspective
"Mortgage bonds had a seesaw session today but did close near the lows of the day while equities closed up for the first time in more than a few trading sessions. Equities are at oversold levels and due for a bounce back rally. Should this happen mortgage bonds and rates may suffer. While it is early to tell what it is not to early to do is lock in your rate and protect you from potentially higher rates. If you don't mind taking a little risk waiting for tomorrows trading action before making a decision could potentially pay off." -Manny Gomes, Branch Manager, Norcom Mortgage
"With the benchmark 10year treasury note unable to break below 2.47, I think it would be wise for people closing within 15 days to take advantage of today's improved price and lock in. I favor floating longer term loans." -Victor Burek, Open Mortgage
"Still in the recent confined range. I would still recommend locking anything within a 10-15 day window of closing. Not sure what the prospects truly are for a substantial pricing improvement moving forward. We are trading in a tight range of 20-30 bps on the 10 year US Treasury and most would agree that it is more likely we break higher than lower. I would be cautious as we progress into the end of August and into September. Europe's problems can be here today gone tomorrow. I believe this week's data is non-market moving, therefore we are subject to traders perception, geopolitics, and foreign economic events. " -Constantine Floropoulos, Quontic Bank
"Float cautiously, but float for the time being in my opinion. Rates held a tight range during a volatile week last week. With tensions oversees and debt issues in Europe continuing to make headlines, I see room for improvement back to the lows seen in late May. As always, keep in contact with your loan officer."-Steve Chizmadia, Mortgage Consultant, American Capital Home Loans
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).