February 19, 2016
Mortgage rates improved slightly today, on average, despite modest weakness in underlying bond markets. We discussed this possibility yesterday in that lenders hadn't fully adjusted rate sheets to reflect yesterday's market improvements. This isn't uncommon during episodes of increased market volatility and it a small way, it lowers the stakes for the following day (because lenders have some room to lower rates even if markets aren't totally cooperating).
Markets didn't fully cooperate today, but remained docile enough for most lenders to offer slightly stronger quotes. The improvement would only be seen in the form of modestly lower costs whereas contract interest rates would be the same as yesterday. The most prevalently-quoted conventional 30yr fixed rate is currently 3.625% on top tier scenarios.
Loan Originator Perspective
"I've provided some guidance to clients this week and it was to float. Yes, we'll see some volatility day to day, but seeing the 10 year Treasuries approach and intra-day pass 1.84 yield, but then nicely bounce lower gives confidence. For short term loans - 30 days and under, locking is a smart move. Past 30 days, my borrowers have confidence in the market ultimately being stronger/same as today." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
"Bonds have managed to hold onto most of the gains of the past day. Unfortunately, we had a small pull back right at the time when most lender release rate sheets. This caused pricing to be weaker than it should. Since then, most of the early losses have been erased. That said, I think it would be worth the risk to float over the weekend. If you must lock today, hold off as late as possible as some lenders have repriced for the better." -Victor Burek, Churchill Mortgage
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).