July 18, 2016
Mortgage rates remain under pressure over the past few weeks after hitting near-all-time lows in early July. With one exception, rates have been either sideways or higher every day since July 6th. In that time, they've moved up roughly an eighth of a point. Today would be easier to characterize as "sideways" for most lenders, although a few raised costs just slightly. The most prevalently-quoted conventional 30yr fixed rate for top tier scenarios remains 3.375%.
Certainly, 3.375%, itself, is not bothersome in a historical context. Indeed, it was the most prevalent rate during the era of all-time lows in late 2012 and early 2013. The only inconvenience is the recent pattern of behavior. Over the past 3 years (or past 30 years, depending on how far back you want to go), rates have been in a long-term downtrend. During that downtrend, we've seen and can expect to see periodic moves back toward higher rates (aka "corrections").
Sometimes these corrections are short-lived and other times they serve as a more profound shift back to the higher side of the long-term trend. The current correction is still definitely in the "short-lived" category, but the safest way to approach these bounces is to assume they continue to bring bad news for rates until we have clear evidence to the contrary. Each passing day of sideways or higher rates means we're not there yet.
Loan Originator Perspective
I do not see much benefit with floating right now. If you are happy with your current quote and are within 30 days of funding, locking today makes sense. Bonds appear to not want to move to lower yields..each attempt is met with selling taking bonds the wrong direction for those hoping for rates to come back down. -Victor Burek, Churchill Mortgage
I'd hoped the unrest in Turkey might incite a small bond rally, but traders shrugged it off and rates wandered higher today. Our 1.53% line in the sand for treasury yields has been firmly broken, and if there's a short term trend, it's towards higher rates. Until some significant motivation emerges for rates to drop, I'll be locking earlier in the process for most deals, the good news is that rates are still wonderful. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.375%
- FHA/VA - 3.25%
- 15 YEAR FIXED - 2.75%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- In the biggest of pictures, "global growth concerns" remain the driving force behind the long-term trend toward lower rates
- Amid that trend, periodic corrections toward higher rates can and will happen. These can happen for no apparent reason, or they can be brought on by changes in expectations surrounding central bank policy at home and abroad, as well as geopolitical and systemic risks
- Time horizon and risk tolerance are 2 variables to consider when it comes to locking. If you have plenty of time and don't mind losing some ground, set a limit as to how much higher rates could go before you'd lock to avoid further losses, and then float in the hopes of never seeing that limit.
- In the shorter-term, it's always good to look for lock opportunities after rates have been moving lower or sideways repeatedly, especially if they've since begun to move back up in any sort of consistent way.
- 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).