April 22, 2016
Mortgage rates continued higher today, solidifying this week as the worst one in quite a while. Not since the first week in November have rates risen so quickly. That said, the volatility might be a bit easier to stomach this time around--especially for those who haven't been able to lock a rate yet. Reason being: the total move amounts to about an eighth of a percent.
Rates were so low previously that lenders weren't under as much pressure to compete to stay busy. That left them with a bit of margin to cushion the blow of this week's market movements. In several cases, top tier scenarios are still fetching conventional 30yr fixed quotes of 3.625%, although 3.75% is slightly more prevalent today.
In terms of strategy from here on out, yesterday's advice stands. If you haven't locked yet, be aware that the current momentum toward higher rates is the strongest since early March. Then, as now, it doesn't make much sense to bet against that momentum until it has leveled-off or reversed course. There's always some chance that could happen next week, but chances are at least as good that it won't happen fast enough for you to risk it.
Loan Originator Perspective
"Rates' steady march upward continued today, and MBS prices are now down 24-32 for the week, equating to a cost of .75% on an average loan. That's a significant move for 5 days, particularly since it wasn't due to any robust economic news. The trend isn't our friend, I've been locking early, and will continue to do so. Floating borrowers need to have clear strategies in place, and "just waiting until rates come back" isn't a strategy!" -Ted Rood, Senior Originator
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 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 have seen only brief episodes of volatility in a low, narrow range.
- Some of the forces that had been helping rates are now at risk of reversing course. Namely, stocks and oil have been trying to break higher and European bond markets bounced near all-time lows.
- We'd already switched to lock bias on April 12th due to the end of a downtrend in rates, but now we're now in a situation where rates may be embarking on a trend higher. Locking is a safer bet until such a move can be ruled out.
- 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).