Mortgage Rates continued their bounce back from abrupt weakness on Friday. The two days of gains so far this week bring rates back within striking distance of all-time lows ahead of several key events in the coming days. Markets have essentially shifted their focus to these events: the FOMC Announcement tomorrow and perhaps an even more important announcement from Europe's Central Bank on Thursday, followed by the important Employment Situation Report on Friday.
With those events on the horizon, markets mostly drifted sideways during business hours today, but had improved enough in the overnight session ("improved" in this case, referring to lower interest rates in bond markets) to get that sideways slide started off in better territory. Most lenders offered increased rebates or decreased closing costs for the prevailing Best-Execution rate of 3.5%.
(Read More:What is A Best-Execution Mortgage Rate?)
Tomorrow begins 3 days that could drastically change the state of mortgage rate environment. As with any such event, we'd note that "COULD" is the operative word. There's never a guarantee that a big ticket event WILL necessarily do much of anything to interest rates. So all we can do is make note of certain events that have a lot of POTENTIAL energy.
Wednesday, Thursday, and Friday see three such events. Tomorrow brings the Fed Rate Decision (or FOMC Announcement). Some market participants expect the text of the statement to change significantly and possible even to include mention of a different time frame than the recent "late 2014" verbiage. Others think the Fed might announce additional stimulus efforts specifically targeted at the mortgage market, while a majority feel that they will hold off on drastic changes until at least the September meeting.
In short, the more the Fed says to directly target Mortgage-Backed-Securities (MBS), the better it could be for mortgage rates. Even the skeptics who aren't holding their breath for anything significant tomorrow are still assuming there will be some evolution of verbiage. That sets up the risk that whatever verbiage arrives, might not be "enough" for bond markets, which could lead to afternoon weakness, but we'll just have to evaluate those possibilities as they arise. If mortgage rates are at risk of a mid-day price change following the FOMC announcement, it's unlikely that you'd have time to coordinate a quick enough lock to beat the reprice unless you specifically coordinated this with your mortgage professional. In that sense, it's mostly a decision you'll need to make before the event itself.
Long Term Guidance: We'd continue to advocate against trying to "get ahead" of current market movements due to the high degree of uncertainty. In the past, we would have interpreted that advice as a suggestion to lock, but in the recently "low and sideways" environment, it's probably better-read as a suggestion to go with the flow of gradually lower rates until we see the pattern definitively break. It's a reasonably safe assumption that European concerns will generally continue to apply downward pressure on rates although there are no guarantees that the right piece of news or economic event couldn't mark "the turning point" at which rates bottom out. On any given day, rates have been at or near all-time lows and in the grand scheme of things, unable to move lower as quickly as Treasuries for example. So although there is potential gain from floating, it's still a historically excellent time to lock if you'd prefer to take the risk off the table.
Loan Originator Perspectives
Kent Mikkola, Mortgage Loan Originator, NMLS 353976
Remember to take into consideration the following points when considering to lock: 1. How long til you close - If you only have 15 days til you anticipate closing, there isn't a lot of time to make up any potential losses that could occur. 2. Does the lender offer a float down/renegotiation of your locked rate - If you can float down a locked rate, you are protected from rate increases and significant rate decreases. Speak with your originator in regard to other facets to consider before locking in.
Victor Burek at Benchmark Mortgage
Most of the losses from Friday's mini sell off have been recouped, but lender pricing is still lagging. As always, lenders take away much quicker than they pass along improvements. I favor floating all loans overnight, but be prepared to lock tomorrow. High risk events coming later this week.
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.5%, Some Approaching 3.375%
- FHA/VA - 3.25-3.5% (varies more between lenders than conventional 30yr Fixed)
- 15 YEAR FIXED - 2.75 - 2.875%
- 5 YEAR ARMS - 2.625-3. 25% depending on the lender
Ongoing Lock/Float Considerations
- Rates and costs continue to operate near all time best levels
- Current levels have experienced increasing resistance in improving much from here
- Rates could easily move higher or lower, but given the nearness to all time lows, there's generally more risk than reward regarding floating
- But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
- (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario. There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).