June 18, 2015
Mortgage rates had a far calmer day compared to yesterday's volatility. Morning hours brought stronger economic data. While this did put some pressure on the bond markets that underlie mortgage rate movement, it wasn't enough for most lenders to recall their first rate sheets of the day. After European markets closed, US markets improved enough in the afternoon to prevent any further risk of mid-day reprices from lenders. The most prevalently-quoted conventional 30yr fixed rate for top tier scenarios is still 4.125% but some of the more aggressive lenders are back to 4.0%.
While it's nice not to be moving any higher in rate, it would be nicer to see a stronger push toward lower rates in the wake of yesterday's Fed announcement. The lack of progress suggests we should continue to be cautious when it comes to the "lock or float" discussion. As for now, rates are still consolidating sideways after the big move higher in in early June. Such examples of consolidation can be followed by a bigger move in either direction. We'd need to see more commitment to lower rates before we can rule out that the bigger move will be to another round of 2015 highs.
Loan Originator Perspective
"Mortgage Rates remained at the same levels today. The lack of improvement in rates after the Fed, yesterday, is rather concerning as the current trend appears to be towards higher rates. Until there is an obvious change of direction, and there certainly has not been one yet, I would lock any and every loan at your first opportunity." -Brent Borcherding, brentborcherding.com
"If you floated overnight, you should be able to lock today with better pricing. Floating now is risky as the gains we enjoyed yesterday were not extended today. Rates want to move higher, that's the trend until it isn't. The only reason to float is if you think there will be no Greek debt deal. One thing we all should have learned by now, the EU is very good at kicking the can." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.125%
- FHA/VA - 3.75
- 15 YEAR FIXED - 3.25-3.375%
- 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 was Europe and the introduction of European quantitative easing.
- It's a highly uncertain time for global financial markets. There is much debate over whether or not the global economy is turning a corner, thus justifying a widespread move to higher rates. That's made 2015 significantly more volatile than 2014 for markets. This means lender rate sheets may change appreciably from day to day, and sometimes even several times in the same day.
- Bottom line: European Quantitative Easing helped push global rates to all-time lows in April. Now, the big risk for mortgage rate watchers is that we might have turned a long term corner. That risk is being compounded by speculation about the Federal Reserve raising rates by the end of 2015.
- May and June have amounted to the 2nd major move higher bounce so far this year. Every time this happens, we have to consider the possibility that this will be a big-picture, long-lasting correction. Until such a thing can be ruled out, Locking makes far more sense.
- 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, conventional 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).