April 18, 2016
Mortgage rates held steady today, leaving them just off the lowest levels in nearly three years. Market conditions were somewhat volatile surrounding a weekend meeting in Doha regarding potential changes in oil output. Oil prices fell precipitously to begin the week as producers failed to reach an agreement.
What does that have to do with mortgage rates? Oil prices have had varying amounts of impact on broader markets for more than a year now. While it's far from a direct relationship, oil prices and interest rates have tended to move in the same direction at the same time. Today was no exception, generally speaking. After oil's initial losses overnight, rates looked set to begin the day with an advantage, but by the time lenders worked up the days first rate sheets, bond markets had given up all of the early gains for reasons beyond the oil price volatility.
The net effect is that rates are right in line with Friday's. Most lenders have been quoting top tier conventional 30yr fixed rates of either 3.5 or 3.625%, though there are a few laggards at 3.75% and even fewer standouts at 3.375%.
Should you lock? With rates near recent lows and some apparent resistance to further improvement, locking is a more compelling option than it had been a few weeks ago. 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.
Loan Originator Perspective
"MBS have fared very well vs the benchmark 10 YR UST. With low to negative interest rates in many major world economies, I am a believer we are yet to see the bottom on domestic rates, it's only a matter of time." -Constantine Floropoulos, VP, The Federal Savings Bank
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).