February 27, 2015
Mortgage rates managed to scrape together modest gains for today's month-end session. In terms of the financial markets that dictate mortgage rates, the last day of the month can be a volatile day that shuns the normal cause and effect relationships between data and market movement. Today's example thankfully bucked that trend (perhaps because the rest of the month had already given us plenty of volatility). Trading levels were stable to stronger all day, allowing many lenders to drop rates in the middle of the day.
3.75% remains intact as the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios, though 3.875% is still fairly common. Lenders erred on the side of caution, in general, in that they didn't quite keep pace with the improvements in underlying markets. In other words, they'll have some extra improvement to pass along if markets hold their ground to start next week.
Loan Originator Perspective
"Rates are range bound with support at 2.04 and resistance at 2.00. Very weak data this morning was unfortunately unable to break us through 2.00. We have to several important pieces of economic data to hit on Monday. If the data is weak on Monday, i think we can break the 2.00 resistance (good implications for mortgage rates); however, if it is stronger rates could also burst through the ceiling at 2.04 (bad for mortgage rates). My advice would be to take short term closings off the float boat and lock them up today. A few lenders have repriced for the better, so before locking check to see if you lender has done so. If your lender has not repriced for the better, i would float over the weekend." -Victor Burek, Open Mortgage
"Rate markets enjoyed a sedate Friday to end the month, with minor pricing improvements on my rate sheets. While we're still closer to the rate highs for February than the lows seen early in the month, at least we've regained some ground, and appear to be in a "wait and see" mode at the moment. I'll probably still lock the majority of my submissions early in the process, particularly for borrowers with limited risk tolerance, high debt ratios, or tight cash to close. After all, "One in the hand beats....."" -Ted Rood, Senior Originator
"Today's gains can be attributed to a combination of month-end bond buying and a economic data coming in slightly lower than forecast. These gains still did not offset yesterday's losses and lenders have been reluctant to pass any improvements onto rate sheets. Next week brings us the Jobs Report which is will be the last print before the Fed's quarterly statement in March. Volatility is highly possible leading up to the report. If you have low risk tolerance and need to lock in the next 30 days you should strongly consider it." -Justin Dudek, Mortgage Professional, Supreme Lending
Today's Best-Execution Rates
- 30YR FIXED - 3.75
- FHA/VA - 3.25-3.5
- 15 YEAR FIXED - 3.00-3.125
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2015 began with a strong move to the lowest rates seen since May 2013. The catalyst has been and continues to be Europe.
- European bond yields trended constantly lower in 2014, thus playing a prominent role in keeping US rates lower than they otherwise might be. Many feel that Europe will continue to slide until their central bank engages in US-style quantitative easing. Some see this happening in early 2015. In any event, we're looking for a turn in Europe, first and foremost, before worrying about the longer-term trend in bond markets being at serious risk of reversing.
- It's impossible to know when Europe will turn a corner, and even then it's only the sort of thing we'll be able to observe in hindsight. That means every head-fake toward higher rates runs the risk of developing into a longer term rise, even if those risks vary greatly in terms of probability. Clients with longer term time horizons and who otherwise don't mind losing some ground in exchange for the chance at locking even lower rates are the only ones who should float. Clients who must close by a certain date or who can't afford to lose any ground on rates should generally be locking even though the longer term trend has been in their favor for over a year now.
- 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).