June 6, 2016
Mortgage rates moved slightly higher today, erasing only some of the massive improvements seen after last Friday's jobs report. In general, most lenders moved one-eighth of one percentage point lower in rate on Friday. Today's weakness isn't enough to raise rates by an eighth of a point, so instead, the weakness comes in the form of slightly higher upfront costs for the same rates as Friday. The most prevalently-quoted conventional 30yr fixed rate remains 3.625% on top tier scenarios for most lenders, though a few of the less aggressively-priced lenders are quoting 3.75%.
It should be noted that 3.625% is the lowest stably-held 30yr fixed quote in more than 3 years. We've seen rates move lower a few times since then, but never for very long. As such, no one could argue that it makes sense to favor locking any time rates are this low.
Loan Originator Perspective
"Rate markets pondered Friday's dismal jobs report today, but stayed within recent ranges. Bond traders are apparently willing to wait until next week's Fed statement before committing to lower rates. There's no chance of Fed raising their overnight rate during June's meeting, the focus will be on their language and economic forecasts. Since we seem unlikely to move much lower until next week, floating borrowers have a choice: take the gains and don't look back, or continue to wait in hopes the Fed Statement is bearish enough to jar yields lower. In my mind, it's 50/50 lock/float now, but for those closing soon, why not lock them up and move on?" 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
- Markets are primarily concerned with the timing of the Fed's second rate hike (after they first hiked in December 2015)
- After bottoming out fairly close to all-time lows in February, rates have been in an increasingly narrow range just above all-time lows
- Fed hike expectations come and go, creating volatility within that low, narrow range. Things won't get serious until we actually break out of that range.
- After fears increased that the Fed would hike in June, the current flavor of the month is that they'll hold off until at least July. This has helped rates move back toward the lower end of that long term range. These have historically been good locking opportunities in 2016 (because rates tend to rise back toward the higher end of the range shortly after hitting the lower end). That trend won't continue forever, but until it is broken, it provides a useful way to know how advantageous current rates are, relative to other recent offerings.
- 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).