May 19, 2016
Mortgage rates bounced back today, to some extent, after rising at the fastest pace in more than 3 months yesterday. Most of yesterday's damage remains, however, and most lenders are still quoting conventional 30yr fixed rates that are an eighth of a point (.125%) higher than those seen on Tuesday.
This flies completely in the face of this week's Freddie Mac rate survey, which noted very little change in last week's "3-year lows." True, rates were near 3-year lows last week and earlier this week, but that changed abruptly yesterday. At least half of the change occurred after the Fed's 2pm release of its "Minutes" (from the late April Fed meeting). Freddie Mac is essentially done counting survey responses by then, so all of the dramatic movement happened just late enough to miss being included in this week's survey.
Bottom line: borrowers should be aware that rates are definitely no longer at 3-year lows.
As to the outlook, we should all be aware that days like today can often follow days like yesterday. This little bounce back is "nice," but it's more of an epilogue to an ominous story--the kind of story that could have a sequel. In other words, don't let your guard down just yet. We still haven't seen enough of a bounce back to to rule out more volatility in the near term.
Loan Originator Perspective
"The interest rate market bounced back a bit today, certainly calming some jitters. Pricing hasn't worsened substantially from yesterday, I'd like to see this trade pan out before locking loans that have at least 30 days to close. " -Constantine Floropoulos, VP, The Federal Savings Bank
"Bond markets took a deep breath today, as Fed speakers mitigated yesterday's minutes with some less alarming comments. My pricing actually improved compared with prior rate sheet. Doesn't mean we're back to falling rates, but at least the bleeding has stopped. Float with caution, and only if you can afford to be wrong." -Ted Rood, senior originator
Today's Best-Execution Rates
- 30YR FIXED - 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.
- The Fed's most recent announcement at the end of April reinforced their cautious approach to rate hikes. This helped rates improved through mid May
- Now some investors are getting concerned that the Fed may be more prepared to hike rates than markets currently expect. This could create volatility and pressure toward higher rates heading into the June Fed meeting, thus favoring locking vs floating.
- 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).