March 24, 2016
Mortgage rates reversed course today, heading back toward the higher levels seen earlier in the week. It's no mystery that rates have been paying attention to stocks and oil prices more than normal and thus not much of a surprise to see rates begin moving higher after stocks and oil did the same. The bond markets that drive mortgage rates were actually stronger in the morning before weakening quickly into the afternoon. As such, many lenders raised rates in the middle of the day, meaning quotes from yesterday afternoon or this morning would no longer be available.
Despite the near-term volatility, nothing is being decided in the bigger picture. Rates continue to operate well under 4% for top tier conventional 30yr fixed scenarios. And while they've approached a sort of crossroads level of 3.875% in some cases, today's weakness certainly wasn't enough to push us down the darker path. That remains a risk, to be sure--just not one that we'll be able to assess until financial markets get back to business after the upcoming holiday weekend (bond markets closed early today and are fully closed tomorrow in observance of Good Friday).
Loan Originator Perspective
"Bonds sold off and rates worsened today. Bond markets closed early (and are closed tomorrow as well for Good Friday), and extended weekends often include bond selloffs and/or rate sheet price worsens. Treasuries are still below their 1.93% resistance line, which is encouraging. It's a long time until markets reopen on Monday, who knows what drama might unfold by then. I have some new applications floating, but bulk of my pipeline is locked, and I'm glad for that!" -Ted Rood, Senior Originator
"Bond markets are struggling to break below certain resistance levels, but are tamely trading in a confined "wormhole" range. With the light participation & early market closures do to the Easter holiday and lack of any relevant data I wouldn't expect much volatility going into the weekend. Any dramatic moves between today and tomorrow will be quickly corrected come next week, barring the unpredictable. Generally speaking I think rates are do for a dip, and am optimistic next weeks data, along with global economic & geopolitical uncertainties may create a catalyst to better rates. I am floating my entire pipeline that is not scheduled to close." -Constantine Floropoulos, VP, Quontic Bank
"With a long holiday weekend ahead of us, if you can tolerate the risk I would float until Monday. Lenders tend to be quite conservative with their pricing ahead of a long weekend. As always, only float if you can afford to be wrong." -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 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 markets began the new year with rates moving surprisingly lower. Major losses in stocks and oil prices were part of the same trend of investors moving away from risk.
- After bottoming out fairly close to all-time lows in February, rates began to rise somewhat sharply in March as market panic subsided and as the Fed signaled it would probably still hike rates in 2016--just not as quickly as anticipated.
- It remains to be seen whether markets can continue to move in this risk-friendly direction (read: bad for rates, good for stocks). Stocks have yet to break out of a gradual downtrend that began in mid-2015. If they do, it could keep pressure on rates to continue higher.
- We've been leaning toward locking since March 1st, which has proved to be a very solid strategy. The 3rd week in March is the first time that it made much sense to reconsider that strategy, but we still haven't seen enough of a turnaround to pull the trigger firmly. In other words, risks remain that rates are in the earlier stages of a longer term trend higher.
- 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).