September 29, 2015
Mortgage rates began the day moderately lower. As equities markets failed to mount any counterattack to recent losses, bond markets surged--including the mortgage-backed-securities (MBS) that dictate mortgage rates. As such, most lenders were able to offer mid-day improvements to the morning rate sheets. By the end of the day, the average rate sheet was as strong as it's been since early May 2015.
At current levels, a conventional 30yr fixed rate 3.875% is a more common quote than 4.0% for top tier scenarios. Some of the more aggressive lenders are already down to 3.75%.
The next few days bring even more fuel for market volatility. As always, depending on the nature of the scheduled events, rates could move either higher or lower. The increased volatility means increased risk and reward when it comes to locking or floating. If you don't like high stakes games, locking is a fine choice with rates at 4-month lows. Tomorrow is the first of this week's biggest days for potential volatility with Friday's Jobs report being the main event.
Loan Originator Perspective
"Mortgage Rates improved today and we're nearing the lows of the last 5 months. Momentum "feels" like its in our favor, but until we see a strong and committed break lower we could simply be at the bottom of the range. The smart move, the one that plays on the highest odds, is too lock at this level." -Brent Borcherding, brentborcherding.com
"Month end bond demand, a dour world wide economic outlook, or perhaps both helped rates improve further today. It's great to hold onto yesterday's gains, the tricky question is whether they'll last as we near Friday's September NFP jobs report release. If we do, it's a strong indicator this rally has legs. If we don't (the more likely scenario), the jobs' report takes on even further significance. No shame at all in locking when we're near the best pricing in a month. If you float, stay close to your loan officer, you may end up needing to lock in a hurry." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.875
- FHA/VA - 3.5 - 3.75%
- 15 YEAR FIXED - 3.125 - 3.25%
- 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. Investors bet heavily the move lower in European rates and domestic rates benefited as well. But with those bets finally drying up in April and with the Fed seemingly intent on hiking rates in the US, May and June saw a sharp move back toward higher rates. The implicit fear is that global interest rates set a long term low in April, and have now begun a major move higher.
- July said "not so fast" to that potential "big bounce." Some of the data began to suggest the Fed is still a bit too early in talking about raising rates in 2015--particularly, a lack of wage growth or any promising signs of inflation. But Fed proponents maintain that low inflation is a byproduct of temporary trends in the value of the dollar and the price of oil, and that once these factors level-off, inflation will ultimately return. That side of the argument suggests that inflation could increase too quickly if the Fed hasn't already begun normalizing interest rates.
- With all of the above in mind, locking made far more sense for the entirety of May and June, and we were not shy about saying so. The second half of July saw that conversation shift toward one where multiple outcomes could once again be entertained. In other words, we went from "duck and cover!" to "let's see where this is going..." Even the Fed took a similar stance when it held off raising rates when it had an excellent opportunity to do so in September's meeting.
- 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).