February 12, 2016
Mortgage rates rose rapidly today, relative to their average intraday movement potential. Things have been far from average, of course, and so it is that today's intraday losses can be among the worst of the year while the outright levels are the 4th lowest in more than a year.
In other words, we only lost as much ground as we did because of how much ground we've been gaining recently. Recent action foreshadowed today's weakness to some extent, and my conclusion yesterday about the ephemeral nature of long term lows is quite applicable today: "markets run hard. Sometimes they can surprise you as to how hard and how fast they're willing to run. But then at some point, the running is over, or worse: we run in the other direction."
While today did indeed bring a "run back in the other direction," there's still no telling if it will end up being the start of a long-term bounce or simply a byproduct of investor caution heading into the 3-day weekend.
The average lender is now back to quoting conventional 30yr fixed rates of 3.625%, up from 3.5% yesterday. A few of the less-aggressive lenders are back to 3.75% already. But again, factoring out the past 3 days, today would be the best day for mortgage rates in more than a year.
Loan Originator Perspective
"If you didn't lock before the mini reversal in rates, don't be upset, it's impossible to catch a falling knife with 100% accuracy. 3 day weekend coming up and we can assume today's move is attributed somewhat to the extended weekend. Locking is always a good decision, but technicals and fundamentals are pointing towards lower rates. I favor floating today. " -Constantine Floropoulos, VP, Quontic Bank
"Rates rose today, which isn't unusual considering how fast they dropped on Wed/Thur. Market pullbacks are to be expected, the $20 question is how long it lasts, and how high rates go. As of early PM, we're near early week levels on MBS. With markets closed on Monday for Presidents' Day, it's going to be a while before new rates come out, plenty of time for news to impact sentiment. Bottom line: if you're happy with your pricing today, grab it and don't look back. Floating entails a higher chance of short term pain than gain." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.625
- FHA/VA - 3.5%
- 15 YEAR FIXED - 3.125
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- The Fed finally hiked on December 16th, causing fears of rising rates in 2016.
- But global financial markets came into the new year in distress. Now markets aren't even convinced that we'll see another Fed rate hike in 2016. Major stock indices plummeted around the world, and investors sought shelter in the bond market. When investor demand for bonds increases, rates fall.
- So we're left with much lower mortgage rates despite the Fed having just begun its hiking cycle. This paradoxical trend can continue as long as global market turmoil fuels a demand for safer haven investments. A big bounce in oil/stock prices could mean trouble for rates--at least temporarily.
- 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).