June 9, 2016
Mortgage rates moved slightly lower today, bringing them to levels seen only one other time in the past 3 years. Even then, that "other time" was only for a few fleeting hours on February 11th. This time around, we've been holding near these 3-year lows in much more stable fashion. If rates are able to move any lower from here, that will put them in line with all-time lows. That would connote an average conventional 30yr fixed rate of 3.375%, which isn't too far away considering more than a few lenders are quoting 3.5% on top tier scenarios today. 3.625% remains slightly more prevalent.
Loan Originator Perspective
"Overnight we saw the benchmark 10 year break below a key level of resistance at 1.70, but it has run into another brick wall at 1.66. I advised locking yesterday, and with the improved rate sheets this morning, I think locking continues to make sense. " -Victor Burek, Churchill Mortgage
"Pricing has improved well enough today to warrant strong lock considerations. Depending on your timetable to close I favor floating as I feel this rally still has some legs. " -Constantine Floropoulos, VP, The Federal Savings Bank
"Treasury yields finally broke their long established floor of 1.70% today (1.67% at press time), which is a very positive sign for rates. My pricing improved slightly over yesterday's, and the trend is now our friend. Loans nearing closing may well want to lock, but if you're 30 days or more from closing will likely benefit by floating, provided you have some risk tolerance. It will be interesting to see where we go from here, that's for sure." -Ted Rood, Senior Originator
"Several factors seem to be pushing worldwide investors into Bond investments subsequently pushing yields lower. With US bond rates continuing to be attractive relative to the rest of the world we have built in demand that could stay with us for some time. That being said, yields need to push convincingly lower from here to break through a level of support that has been stubborn. Floating is probably safe right now but with a wary eye on the trigger to lock in if things change quickly. Protecting the gains we have now by locking your rate is never a bad move, however." -Hugh W. Page, Mortgage Banker, Seacoast Bank
"This has gotten interesting (and a bit technical). 10 year treasuries have decided to revisit the 1.6's today. This is important because these are the lowest levels seen in years. With the exception of a short period of time in 2012 it the lowest in modern history. Exciting right? Not really. We were here in 2013, 2015, and this is our second visit this year. 1.6 should get frequent flyer miles. What IS exciting is if we break below 1.6 because that could result in new all-time low mortgage rates. It’s been a tough nut to crack but let’s not give up hope. Despite that hope I think this is a good level to lock at. If we don’t break lower then congrats, you’ve locked in one of the lowest rates in history. Recent history suggests that failing to break 1.6 could result in a nasty short term adjustment for rates, see Jan 2015 and Feb 2015 as examples." -Jason B. Anker, Vice President- Loan Officer at Salem Five
"Rates are currently struggling to break a long term technical level we've seen numerous times in the past 5 years. We approached this level and rejected it in late 2011, we were able to actually break through it in mid to late 2012 for all time lows in rates, but we held those levels for the last half of that year and when we moved above the technical levels we are testing now, we moved above it quickly. We have since tested these levels in April of 2013, January of 2015 and from February of this year through today. We have not convincingly broke the level of resistance we are currently fighting and knowing whether we can break through it with conviction or if we will bounce of it in the wrong direction for rates is anyone's guess. I'd take the cautionary approach here and lock any and all loans closing within 30 days. Especially if they have been in process for a week or two and seen substantial improvements from the day they applied. Things could get better, but history also shows they could get worse quickly." -Steve Chizmadia, Mortgage Advisor, Finance of America Mortgage, LLC.
"I've been advising locking all week for shorter duration (30 days or less). We've had nice gains in price and rate plus next week is the FOMC meeting. We tend to see some bond selling in the couple of days leading up to the announcement. Better to have locked when you should have floated, than floated when you should have locked. With that said, all of my 30+ day closings are floating right now." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
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).