March 1, 2016
Mortgage rates moved quickly higher today, bringing them to levels not seen since early February. It continues to be the case that context is important when discussing rate movement during that time. In fact, early February was approximately when rates leveled-off after a strong move lower to begin 2016. Everything has transpired in a range between the rates seen on February 5th and February 11th.
This range has been narrow enough that all but a few days during the past month have seen contract interest rates at the same level. That means that the mortgage rate used to determine payments (aka the "note rate" or "contract rate") has been the same while the upfront costs or credits have varied. Those upfront costs affect the "effective rate." In other words, in a case where the note rate is 3.625%, the effective rate might be 3.68. If we talk about rates "going up," it could merely mean that the upfront costs moved high enough to nudge the effective rate up to 3.69 while the note rate remains 3.625%.
I go into this extra detail today because for the first time in more than a month, the actual note rates will be moving higher in many cases. 3.625% had easily been the most prevalent conventional 30yr fixed quote on top tier scenarios. Today's losses mean more borrowers will be seeing 3.75%.
Loan Originator Perspective
"If you missed the opportunity to lock this morning ahead of the reprices for the worse, I would go ahead and float overnight. We have some solid support just overhead at 1.84 on the benchmark 10 year note that has yet to break. Unless that breaks, I would continue to float and lock on the next dip." -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.625 - 3.75%
- 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.
- We were 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 of March 1st, stock markets look like they're at least attempting to get back toward higher levels. Mortgage rates have been pressured higher accordingly. While we're well off the lows seen in early February, we're still in very low territory historically--low enough that it wouldn't make sense to second-guess a decision to lock, even though there's still a possibility that the longer-term trend toward lower rates could continue.
- 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).