March 3, 2016
Mortgage rates began the day slightly higher, on average, but managed to make it back in line with yesterday's levels by the afternoon. Some lenders are in slightly better shape. Some are worse. In either case, the differences between today and yesterday would be minimal--only affecting the closing cost/credit side of the rate equation (as opposed to changes in the rate itself. Most lenders continue quoting conventional 30yr fixed rates in a range of 3.625% to 3.75% with the latter gaining significant traction over the past few days.
Tomorrow brings the most important economic report of any given month: The Employment Situation (aka "nonfarm payrolls" or simply, the "jobs report"). As always, the jobs report carries significant market moving potential, for better or worse. At the moment, we're in a precarious position when it comes to potential volatility. With rates already at a crossroads on the upper edge of their all-time low range, a big move higher would risk confirming a move into the higher range seen in late 2015. In other words, if we go higher here, it could be harder to get back.
Loan Originator Perspective
"1.84% on the 10 YR US Treasury has held well as support, however as Matt Graham has pointed out the momentum that got us below 2.00% and later on below 1.84% is starting to subside. It is extremely risky to not lock in going into tomorrow's employment data, risk vs. reward merits locking. Albeit I believe rates are heading for fresh new lows, it may take some time before we get there. Loans with a timeline of 15 days should be locking in, longer time frames as always can speculate, but I think we are too close to our support level reversing and becoming a level of resistance to speculate at this point. " -Constantine Floropoulos, VP, Quontic Bank
"The thing about lines in the sand is if you know you shouldnt cross it you probably don't want to stand right next to it for a long time either. Personally I've never been a huge fan of tempting fate. Thats how I feel about the future or interest rates in the short term. We've managed to stay under 1.84 on the 10 year so far today but not by much. The longer we stay near that level the more trades may feel it's time to challenge that line I the sand. I remain optimistic but I'm growing more anxious considering tomorrow is the all mighty jobs report. Floating carries an especially high amount of risk at the moment. The one thing I'd be willing to bet on today is that we don't close near 1.84 tomorrow. Good luck. " -Jason B. Anker, Vice President- Loan Officer at Salem Five
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).