February 17, 2016
Mortgage rates were just a bit higher in most cases today, although some lenders were effectively unchanged from yesterday. If you happened to stop paying attention to mortgage rates on Friday February 5th, today would look downright exciting. It's only in comparison to the strong move lower over the last week and a half that rates are anything other than stellar. The most prevalently-quoted conventional 30yr fixed rates remain 3.625%-3.75% for top tier scenarios, with an average that is near its 2-week high.
Stakes are high for rates as well as broader financial markets at the moment. Both stocks and bonds (which drive the day-to-day changes in mortgage rates) are at a crossroads. One path leads back to extreme territory achieved last week (stock prices and interest rates bottomed out together)--the other back toward January's range. This can be thought of like a rocket trying to make it into space. Rates (and perhaps stocks) are close to breaking free from the effects of gravity. The next move higher from here would paint a fairly gloomy picture--one that implies a longer time in space before returning to earth. Locking is the only safe strategy, although there is much to be gained in the event things turn around tomorrow.
Loan Originator Perspective
"Vegas, baby, Vegas. Are you money and you don’t even know how money you are? Sorry for the movie lines but the lock or float question today is basically gambling and rolling the dice. We’re right at a key level on the 10 year bond at a 1.84 yield. If we break 1.84% rates could move up pretty quickly. If it holds, we could retrace some of the territory we’ve lost since last Thursday. My question always is, would you be more upset if rates went up an 1/8th and you weren’t locked or if they went down an 1/8th and you were locked. So do you feel lucky? Well, do you, Punk? Sorry, different movie." -Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC
Today's Best-Execution Rates
- 30YR FIXED - 3.625
- FHA/VA - 3.25-3.5%
- 15 YEAR FIXED - 3.00
- 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).