July 5, 2016
Mortgage rates dropped noticeably today, bringing quite a few lenders down to 3.25% in terms of conventional 30yr fixed quotes on top tier scenarios. For all intents and purposes, these rates are "all-time lows," even though there were several occasions in late 2012 where some lenders offered lower rates. It just depends on what sort of time-frame you want to put on the previous instances of all-time lows. If we're talking about rates that were available for a few days here and there, then we're not quite back to those yet. If we're talking about the lowest stably-held rate for most top-tier quotes, we're back!
That's all well and good, but what if you want to take advantage of these rates, but can't yet lock, or are in the shopping process for a purchase? While it's true that rates like this have been fleeting in the past, the longer term trends remain squarely in favor of lower rates. That will continue to be the case until and unless we see a massive move higher from here. Massive moves are always possible, but they're less of a threat now compared to 2012. Reason being, we still had the removal of the Fed's accommodative policies to get through. Rates' biggest jolt came after the Fed said it was planning on decreasing its asset purchases in mid-2013.
We just don't have anything like that hanging over our head at the moment. That's not to say that something else can't come along and push rates higher in the short term, but in terms of the sort of major trauma seen in mid-2013, we're fairly well insulated. Does that mean you should float and wait for rates to go even lower? Not necessarily. If rates do continue lower, there will be bounces on the way. With the current winning streak at 7 days, we're increasingly likely to see a bounce soon, and the first bounce after hitting all-time lows (or even "long-term lows") tends to be bigger than average and to last for a few days. Bottom line: it's not crazy to float, but be ready to lock on the next bounce if you have a closing coming up fairly soon.
Loan Originator Perspective
"The fireworks seem to be coming to the bond market after the 4th this year. The 10 year bond hit record lows today. And it’s been a pretty calm and collected day which I think bodes well for rates. If closing in the next few weeks locking won’t hurt, but longer term I’d think you may want to float to see where we go from here, if anywhere. Sideways from here wouldn’t be terrible either." -Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC
Today's Best-Execution Rates
- 30YR FIXED - 3.25-3.375%
- FHA/VA - 3.25%
- 15 YEAR FIXED - 2.75%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Markets had been primarily concerned with the timing of the Fed's second rate hike (after they first hiked in December 2015)
- The possibility that the U.K. would vote to exit the European Union (Brexit) has since taken over as the biggest flashpoint for markets.
- The Fed freely admits it didn't hike in June because of this and because it wants to be sure that jobs numbers aren't taking a bigger turn for the worse. Mortgage rates moved farther into 3-year lows as a result.
- Brexit happened and rates rejoiced. Lock if you like what you see. The longer term trend remains positive regardless, but periodic corrections toward higher rates continue to be a risk.
- 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).