April 7, 2016
Mortgage rates moved lower today, but not by much. Bond market levels typically dictate mortgage rate changes in fairly short order. Oftentimes, a strong showing in bond markets means that rates will be noticeably improved on the same day. But that's not the case today and it hasn't been the case in general, recently. Global economic concerns and financial market volatility have lenders feeling hesitant to adjust rate sheets too quickly.
Even if rates can't move as much as they normally would, at least they're moving in the right direction. Most lenders continue quoting conventional 30yr fixed rates of 3.625% on top tier scenarios with 3.5% becoming more and more common.
In terms of strategy, it's never a bad idea to lock in gains if you've been floating for a while. That said, we are definitely in the middle of a trend toward lower rates. It could end tomorrow, or it could continue for weeks. The only way to attempt to take advantage of such a trend is to set a line in the sand at slightly higher rates to serve as your cue to lock if the market moves against you.
Loan Originator Perspective
"Bond markets pulled back today, leading to slightly higher loan pricing, as an oil rally and Fed Minutes hinted at improving economic conditions. We're still near the best pricing since early 2015, nothing wrong with current rates, but hopes for a continued rally may hinge on new drama, whether economic or geopolitical. I locked the bulk of my May closings today, we'd improved since the initial pricing, and I didn't want to lose those gains. It wouldn't surprise me to see rates rise slightly over the next few days, folks within 30 days of closing may want to take risk off the table and lock their loans." -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).