May 31, 2016
Mortgage rates were generally unchanged to begin the short work-week for financial markets, though that wasn't the case at first. Earlier this morning, most lenders were quoting higher rates than those seen last Friday. Markets improved rather significantly during the course of the day, allowing most lenders to 'reprice' to lower rates, thus bringing them back in line with Friday's.
Despite the apparent lack of volatility today, the rest of the week could see much bigger moves depending on the outcome of the various economic reports that will be released between now and Friday. In addition to the data, financial markets are perhaps even more sensitive to news regarding the potential for a Fed rate hike in mid-June. Today, for instance, a poll came out saying that the U.K. was slightly more likely to exit the European Union (aka "Brexit")--something that could cause the Fed to leave rates unchanged in June. So when the Brexit odds increased, interest rates moved lower in financial markets. Granted, this isn't the only consideration moving interest rates, but it speaks to the diverse sources of volatility in the coming days as investors increasingly try to decide if the Fed will hike in June.
Loan Originator Perspective
"Bonds opened the day well into the red resulting in lenders worsening rate sheets from Friday. Since then, rates have managed to rally and some lenders have even repriced for the better. Some of these gains could be due to month end trading which tends to be supportive. If your pricing is the same or better than Friday, I would look to lock later today. If your pricing is worse than Friday, I would go ahead and float overnight." -Victor Burek, Churchill Mortgage
"Rates hung tough today, posting small gains as consumer confidence was lower than expected. We're still bouncing around our prior range, which has narrowed over the past couple of weeks. When that range breaks, rates typically move dramatically, especially after long "rangebound" periods. My June pipeline is locked, floating some July closings, but stand ready to pull the trigger quickly if necessary. Don't forget, Friday marks the release of May's NFP jobs report, so by end of day Thursday, floating borrowers assume higher risk, for better or worse. I'm 50/50 on locking July closings, but would definitely advise June closings to lock and take risk out of the equation." -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).