July 20, 2015
Mortgage rates did move microscopically higher today, but that's about the worst thing to be said about them. In fact, it's one of the only things to be said about rates anywhere! The bond markets that underlie mortgage rate movement were exceptionally quiet today. This is a trend that's been waxing for two distinct reasons. The first is normal: it's summer! While it's easy to think of financial markets as ruthless electronic hubs of ceaseless activity, they actually depend on the presence of people. And those people (or people they rely on) tend to be out of the office in greater numbers this time of year.
The other reason is the subsiding focus on the high drama in Europe. The drama surrounding the Greek bailout negotiations had been a focal point for financial markets recently. granted, it was only one of several, but certainly the most entertaining, and well covered by media. That drama died down significantly last week, paving the way for true summertime conditions in financial markets. At least for this week.
What does that mean for you? Not too much, actually. If anything, it means that we might see higher incidence of days like today (and late last week) where rates just aren't moving that much. From a strategy standpoint, it means we'll continue to wait before observing the next instance of momentum in rate movement. This, in itself, is notable considering we'd previously been waiting for the existing momentum toward higher rates to end.
Loan Originator Perspective
"Bonds were sedate today, as we drifted towards slightly higher rates in light trading. It's not unusual to see this in the summer, particularly on days when both economic data and global drama are absent. I'm still in a "rather lock than not" mode for most borrowers. It's going to take serious motivation for rates to significantly improve, and I'm not sure where that's going to come from, at least for the moment." -Ted Rood, Senior Originator
"Things have gotten pretty uneventful now that Greece is not mentioned every 2 minutes on every financial news station. It certainly feels like the dog days of summer so things should remain for the most part calm with no large move for rates this week. You can float and wait for a move in the market and hopefully at the least capture a smaller lock period.. " -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.125%
- FHA/VA - 3.75-4.0
- 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. July has thus far provided an opportunity to consider such a big-picture correction might be on hold.
- 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).