July 22, 2015
Mortgage rates haven't made any sudden moves recently. Not only that, but most of the moves have been in a friendly direction this month. There have only been 2-3 days of volatility surrounding the Greek bailout negotiations (European bond market volatility spilled over into domestic bond markets, which affect mortgage rates). Other than that, it's been a slow, steady move back to July's lows--so steady, in fact, that we might start to wonder: "what's the catch?"
There's no reason to ask this question other than the tendency for financial markets to NOT continue to trade in same direction, by the same amount, for too many successive days. With the exception of Monday, we've seen 7 consecutive business days where rates have moved slightly lower, and that's a lot. Bottom line, if you've been holding off on locking during that time, you've now seen enough improvement to be more than justified in pulling the trigger. In the bigger picture, we're still waiting to see the next true instance of momentum in rates. While we can point to those 7 days of modest gains, the bigger picture is still very sideways. We're still close enough to recent highs to remain cautious.
4.125% remains the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios, though some of the more aggressive lenders are quoting 4.0%. Today's improvement would most likely be seen in the form of slightly lower closing costs.
Loan Originator Perspective
"Even though we got much better than expected economic data, rates have managed to hold onto all the recent gains and actually slightly extend them. I am still leery of floating in this market. It seems rates are just waiting to make a move and there is much more room for them to go higher than lower. I continue to favor locking." -Victor Burek, Churchill 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).