March 17, 2016
Almost any major media outlet that covers financial news will have a story out today regarding this week's mortgage rates being higher than last week's. Thile this was true earlier in the week, it has easily and clearly been made untrue with the past 2 days of improvements in rates. At issue: Freddie Mac's widely-cited weekly mortgage rate data doesn't capture rate movements from the latter half of any given week, and ALL of this week's improvements have arrived in the 2nd half. It's not that the Freddie data is wrong. It just needs a week to get caught up with more timely changes.
Mortgage rates improved at their quickest pace in several weeks today as lenders adjusted rate sheets to reflect some of the market improvement seen after yesterday's Fed Announcement. Mortgage rates are driven primarily by the prices of mortgage-backed-securities (MBS). Yesterday's gains in MBS suggested bigger improvements in rate sheets, but lenders have consistently been cautious about being too quick to match market movements due to recent volatility. As such, it wasn't a surprise to see them wait for the strong move in underlying markets to be confirmed before passing along more of the gains.
Yesterday's market movement was confirmed today, and then some. This made it even easier for many lenders to be generous with today's rate sheets. Other lenders are a bit slower to respond, and that's normal. The net effect is a wider-than-normal range of rate quotes today, but with the leaders making it back down to 3.625% on conventional 30yr fixed. The majority are now at 3.75% whereas lenders had been more evenly split between 3.75 and 3.875%.
Loan Originator Perspective
"MBS trading celebrated St Patty's Day by continuing yesterday's gains. It's always encouraging to see pricing improve for multiple consecutive days. As long as the Fed foresees economic challenges, either domestically or globally, rates will have difficulty moving up much. Borrowers just starting their loans may want to float, provided they have some risk tolerance. " -Ted Rood, Senior Originator
"The rate sheets I have seen have passed along most of the recent gains. Anytime we get improved pricing, you should consider locking. I think it might be worth it to float, to see if we can build on these gains. But nothing wrong with locking in the recent gains." -Victor Burek, Churchill Mortgage
"We began the day with strong gains only to have lost most of them by 9:30am. Rates still managed to improve, and although I think many would have hoped for more given the Dovish tone to the Fed announcement, this is a strong showing considering oil and stocks hit new highs for the year. All things considered, bonds are doing well and I remain optimistic about the near future." -Jason B. Anker, Vice President- Loan Officer at Salem Five
Today's Best-Execution Rates
- 30YR FIXED - 3.625-3.875%
- 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).