June 8, 2016
Mortgage rates barely budged, yet again today. But that's not such a bad thing considering they are very close to 3-year lows. On top of that, among the lenders with detectable changes today, most were in a friendly direction. Bottom line, the most prevalent conventional 30yr fixed quote remains 3.625% on top tier scenarios. Several of the best-priced lenders are down at 3.5% and a few are still stuck at 3.75%.
It should be noted that bond markets have been moving more than lenders' rate sheets these days. Today was another good example. Normally, the amount of improvement seen in today's bond markets would have resulted in a more noticeable improvement in mortgage rates. The takeaway is that when rates are this low, lenders have little incentive to keep up with the pace suggested by bond markets. While this does help insulate us against volatility, to some extent, it also means it will take a very big move in markets to push rates much lower from here.
Loan Originator Perspective
"Our benchmark 10 year treasury note has been unable to break below 1.70...it has tried, but no luck yet. Following the strategy of lock the lows of the range and float the highs, I think it is wise to consider locking today. No need to hurry and lock right now, but by end of day if the 10 year note is at 1.70 or higher, I would lock. If we break through, then I would float. " -Victor Burek, Churchill Mortgage
"Since the recent move out of the range into more favorable territory, locking has made a bit more sense. I think we are yet to see this all play out (weak employment, domestic & foreign economic woes-mostly foreign), and pricing improvements are on their way. As always, if you are within striking distance and happy with your rate/payment, locking removes any risk from volatility that may come." -Constantine Floropoulos, VP, The Federal Savings Bank
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).