Mortgage rates fell back to their lowest levels of 2014, with most lenders in similar territory to last Friday. Market movement was moderate, but grew increasingly positive for MBS (the mortgage-backed-securities that dictate lenders' rates) as the day progressed. As such, some lenders released positive mid-day reprices. Before those, rates were just slightly higher on average. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains at 4.25%, and is currently closer to 4.125% than the previous rate of 4.375%. Today's improvement was seen in the form of slightly lower closing costs. That change in costs equates to an effective rate change of 0.02%.
As we discussed yesterday, 4.25% is still technically the outer edge of the longer term range. That range, stretching back to the beginning of February, has centered on 4.375 and 4.5% but has moved out to 4.25% and 4.625% at it's best and worst moments respectively. Today's strength makes this move to 4.25% the most aggressive one yet. While that means we stand a chance to break the range in the coming days, until that actually happens, history suggests more risk associated with floating when we make it down to these levels.
Loan Originator Perspectives
"Pricing this morning opened slightly worse than yesterday but as the day has progressed, rates have rallied and reprices for the better have been reported. Until we can break the current range, I will continue to favor locking for loans closing within 30 days." -Victor Burek, Open Mortgage
"If you've floated to these levels, locking sure seems very enticing, and I would disagree with anyone who decided to do so. We are at the bottom of the range, after all. However, I very well might wait until the 10 yr treasury auction tomorrow to see if that is strong enough to break us through the bottom of the range. Where we are, with that data point on deck, it is probably worth the gamble. " -Brent Borcherding, www.brentborcherding.com.
"The recent bond market & MBS trends have been extremely favorable. Although we continue to see resilience in yields it should be noted that we are still in the recent range. High 2.5's-2.60 on the 10's have clearly been the resistance for quite some time. Although we may break through these levels to more favorable interest rates, it would be irrational to not lock at these levels. We are at the best levels in quite some time. Never try to catch a falling knife." -Constantine Floropoulos, Quontic Bank
"Seems to be increased talk and predictions in the market for lower bond yields. While encouraging, until we see a convincing break in the 10 yr below 2.58 and lower with staying power for longer than a day or so I'm inclined to still recommend locking in these rates now. This is especially true for those closing in less than 30 days. Still too much upside risk as we bounce along the bottom of this range we've been stuck in since early Feb. " -Hugh W. Page, Sen. Mortgage Consultant, M.B.A. Capital Partners Mortgage
"Rates hovering near the lows of the year as markets await motivation to continue improving or head back upward. International tension certainly influences rates, the down side is that the effect can be brief as drama ebbs and flows. As mentioned yesterday, if you're floating, have your favorite news channel on, and your loan officer on speed dial. If you like your current pricing, could certainly do worse than locking it in!" -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"Mortgage Bonds hit the best levels of 2014 today. The last time we near these levels rates began to head higher. I however think this time may be different. Pay very close attention to tomorrows 10 year treasury auction. If the auction results are solid, floating will server you well. If the auction results are not good it may be time to lock. " -Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED -4.25
- FHA/VA - 3.75-4.0%
- 15 YEAR FIXED - 3.375%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The Fed has stayed the course on their $10bln per meeting reduction in bond buying, though markets have handled it relatively calmly compared to the days of "coming to terms with tapering" in 2013.
- Rates fell significantly in January, leveled-off in February and took choppy steps higher in March, they've since settled into a flat range mostly consisting of 4.375 and 4.5%, but with occasional forays to 4.25 and 4.625%
- The uncertain impact on the economy from the colder-than-normal winter weather as well as geopolitical risk surrounding Ukraine helped the range persist.
- While the bias had been generally toward higher rates, it reversed course in April and rates returned to the lower end of the range by May 1st. As the "weather effects" fall out of the spotlight, market participants are seeing a bit more organic weakness in the economy than they'd expected. The focus is returning to economic data to determine where we go from here.
- (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario. There are many reasons a quoted rate may differ from 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).