May 9, 2016
Mortgage rates moved sideways today, taking them one step closer to officially claiming the title of "3 year lows." Tomorrow marks the three year anniversary of the Wall Street Journal article that began the early days of the 'taper tantrum'--the jarring move higher in rates that resulted from markets coming to terms with the end of the Fed's asset purchases.
While rates aren't as low today as they had been before the taper tantrum, the current rate environment is excellent in its own right. Apart from being fairly close to the all-time lows seen in 2012-2013, today's low rates exist without any Fed asset purchases and without any risk that the Fed will surprise the world with a shift toward stricter monetary policy. In fact, if there's any risk for financial markets, it's that the Fed will continue to back away from their rate-hike campaign that began with the first and only hike in nearly a decade this past December.
Most lenders are right in line with rates seen on Friday. The most prevalent conventional 30yr fixed quote continues hovering around 3.625% with more than a few lenders already back down to 3.5%.
Loan Originator Perspective
"A quiet, sideways day with a shade of green today. I’ll take it. From here I’d think we drift sideways also. Rates are strong right now. If you’re closing within 30 days locking makes a lot of sense here, IMO." -Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC
"Pricing improved, slightly, AGAIN today, as oil slid back. There wasn't any particular economic data moving the markets, and gains under these circumstances mean more, to me, than those with obvious motivation. I am not locking anything further than 30 days from closing, and borrowers with some risk tolerance who are 20 days+ out may still consider floating. Trend is our friend, the only question is for how much longer." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.625%
- 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. The last time that happened, stocks cheered, but this time they've been moving lower. Bond markets like that, and they'll continue to like it until stocks prove they can break back above 2015 highs.
- Even though the broader backdrop has taken a positive turn for rates, there are still tactical opportunities to lock. In general, we look for any prolonged moves lower (i.e. 10 days in a row without moving higher) or any major low-rate milestones (i.e. 3-year lows).
- 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).