July 21, 2015
Mortgage rates reversed course today, getting back in line with the recent trend of slow, steady improvements. The average lender is now back in line with their best offerings in more than 2 weeks. This puts the most prevalent conventional 30yr fixed quote squarely in a range between 4.0 and 4.125% for top tier scenarios. With the day-to-day movements being as small as they are, the average borrower is more likely to see changes in the form of slightly lower closing costs (or higher lender credit).
Naturally, today's modest improvement is in line with our broader strategy shift toward a "wait and see" approach. Until recently, locking early and often was the only way to go. To be clear, that's still a perfectly viable strategy. In many cases, it's the only strategy, regardless of what markets are doing. But for those clients with more risk tolerance, who understand the potential costs, the past week has been the first safer-looking opportunity to see if recent highs will hold. It's worth noting that risks do increase somewhat tomorrow as we'll get the week's first significant economic data. That said, increased risk is relatively balanced with increased opportunity.
Loan Originator Perspective
"Not much happening lately with rates. Seems the market is just sitting waiting for some motivation. The benchmark 10yr hit support at 2.40 this morning and has rallied back to resistance at 2.34. With yields at the lows, I think it is wise to go ahead and lock. Some lenders have already repriced for the better, so wait unitl later today to pull the trigger. I don't see much benefit in floating now. Something very significant would have to happen for rates to break much lower, but they could easily rise." -Victor Burek, Churchill Mortgage
"Well, both treasuries and MBS posted midday gains today, and several lenders posted improved rates. It's great to see moves like this, but my enthusiasm is tempered by the fact that we're still range bound, essentially just moving from the higher end to the lower. I still contend it will take serious economic/geopolitical drama to drive rates significantly lower. Until that drama arises, I'll lock on the improved days (such as today), while warily considering floating on others." -Ted Rood, Senior Originator
"rates improved slightly today as the sideways trend continues. I am still in the wait and see camp when it come lock strategies. The trend is sure to shift in the near future and if equities give up gains for the third time after reaching the recent all time highs bonds may be able to catch a bid and that will help home loan rates improve." -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).