August 2, 2016
Mortgage rates moved higher again today, after hitting the lowest levels in roughly 2 weeks last Friday. Like yesterday, today's increase was fairly minimal in the big picture, but successive days of weakness can add up. Unlike yesterday, most borrowers would now be seeing slightly higher costs on today's rate quotes compared to Friday's.
Here's the good news though: apart from the past 2 days, today's rates are the lowest in more than 2 weeks. After rising to a range of 3.5-3.625% last week, conventional 30yr fixed rates are now more likely to be quoted in a 3.375-3.5% range on top tier scenarios.
Low rates aside, today's market movements are suggesting a more defensive strategy (less interested in floating). Although mortgage rates are not directly linked to 10yr Treasury yields, the latter is a good benchmark for following interest rate trends. We'd been watching 1.52% and keeping our fingers crossed that it would act as a ceiling this week. With 10yr yields ending the day near 1.55%, rates are essentially threatening to move higher. The next three days bring a series of important economic reports that could act as motivation for such a move, if they turn out to be stronger than expected.
Loan Originator Perspective
Bond markets pulled back slightly, which I'd commented yesterday that as long as treasuries stayed below 1.52%, our downward rate trend looked promising. Sadly, today we broke that level, and are at 1.53% as of mid day. While the losses aren't huge, they are significant, and the trend (short term, at least) is not our friend at the moment, particularly with NFP looming on Friday. I locked several floating deals this AM, and will look to tie up some more. We may see more losses before rates bounce back down. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.375-3.5%
- 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).