April 15, 2016
Mortgage rates improved slightly today, bringing them back toward the lowest levels in nearly three years. With all of the headlines to that effect yesterday, it's worth taking a moment to clear up. The only mortgage rates that officially hit three-year lows this week were those reported via survey to Freddie Mac during a Monday-Wednesday time window. There have been some exceptionally strong Thursdays and Fridays over the past three years though! Especially this past February, and at the end of January 2015. Clients who got calls from their loan officers on those days got rates that were lower than what they'd have access to today on the same scenario. In other words, we're not quite at the lowest rates in nearly three years, but we're close. And in any event, only a handful of days have been better during that time.
So what kind of numbers are we talking about here? The changes have been too small to mention, really. Almost any scenario would be quoted the same rate today as any other day this week. The only noticeable change would be in the upfront costs (or credits) associated with the rate. Most lenders have been quoting top tier conventional 30yr fixed rates of either 3.5 or 3.625% all week, though there are a few laggards at 3.75% and even fewer standouts at 3.375%.
Should you lock? Sure! Rates are near three-year lows, haven't you heard! Moreover, we've definitely encountered some stickiness in moving any lower from here. What about floating? There's a place for that strategy as well, as long as you understand the risk that markets could move against you and you're prepared to lock at a higher rate if markets move too much. In general though, floating is still riskier now than it was a few weeks ago when rates were clearly in a downtrend.
Loan Originator Perspective
"Bond markets showed some strength today, ending with slight gains. The move was hardly decisive, and it remains to be seen where we go from here. If stock earnings beat expectations, bonds may lose their "risk off" appeal, taking rates upward. I'm neutral for short term locks, my May closings are 2/3rds locked now. We'll need decidedly weak economic data to take us much lower, the bigger question is where we'll move if data meets expectations. Floaters, be ready to lock, don't presume rates only go down." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.625%
- FHA/VA - 3.25%
- 15 YEAR FIXED - 2.875 - 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 HAD been leaning toward locking since March 1st, which has proved to be a very solid strategy, but began to reconsider starting the 3rd week of the month. We've been more open to the idea of floating since then, as long as you're setting a stop-loss level somewhere overhead, meaning you'd lock to avoid further losses if markets move against you.
- 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).