Mortgage rates were almost universally sideways today with very few lenders changing rate sheets noticeably from yesterday. As such, the most prevalent conforming 30yr fixed rate quote remains 4.0% for top tier borrowers. It continues to be the case that paying points upfront in exchange for a lower rate may make sense to some borrowers at these levels. There's nothing inherently bad or good about that strategy. It's simply a trade-off between upfront costs and monthly payment.
The bond markets that underlie mortgage rate movement have arguably been hunkering down for a bigger dose of volatility with tomorrow's big Fed Announcement. Even though there is broad consensus that the Fed will announce the end of QE3 asset purchases, there is plenty of uncertainty and anxiety regarding the other potential verbiage changes in the official policy statement. In other words, markets are now ready to make a bigger move regardless of what the Fed says.
The statement is released at 2pm Eastern. While this does mean that lenders will already have rate sheets out for the day, it doesn't mean you'd necessarily have time to interpret the market reaction and make a lock decision with enough time to before a potential negative reprice. If you have a loan in process that isn't locked, make sure you're on the same page with your mortgage professional regarding the strategy surrounding tomorrow's announcement.
Loan Originator Perspective
"All in all, pretty calm week so far as the market awaits the FOMC announcement on Tuesday. With QE ending, i think the FOMC might be a bit dovish in their announcement which should be favorable to rates. I continue to favor floating loans until within 15 days of closing, then locking." Victor Burek, Open Mortgage
"All eyes and ears of the market are now tuned in to the Fed Rate decision tomorrow afternoon. It appears we won't have much movement until then. For those closing in the next 15 days the risk reward tradeoff is unfavorable towards floating in my opinion. I would protect what pricing we have now to protect agains any uncertainty that triggers a sell off. Beyond 15 days is simply a gut check on your risk tolerance and ability to withstand losing a gamble on rates improving. Of course, it's possible that gamble could pay off." -Hugh W. Page, Mortgage Banker, Seacoast National Bank
"We had a bit of a whipsaw day today, but stayed inside the recent rate range. Tomorrow is the day to watch, as we'll get the Fed statement, presumably giving additional guidance on future rate hikes. Fortunately, it is released in the early PM after rate sheets are out, so prepared borrowers and loan officers can lock floating loans if we lose ground. Just starting your loan? Might want to make sure your lender has all the info they need to lock your rate if MBS weaken." -Ted Rood, Senior Loan Originator
"We are trading in a very narrow range that, for now, is phenomenal. Day to day rates are unchanged for the most part, which creates a great platform to quote, price, and lock. It is quite plausible that tomorrows FED announcement will create a break in the range in either direction. Loans closing within 10-15 days should be locked to prevent any deterioration. I am of the firm belief that we will see better rates, I am only locking loans that are cleared to close." -Constantine Floropoulos, Quontic Bank
"Tomorrow the all important Fed Policy statement is released and this is one of the few releases which occurs after rate sheets are issued. This makes floating into the release an easy recommendation to make. The market tends to move quickly following the release so make sure you are ready to lock should the bond market deteriorate." -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.0
- FHA/VA - 3.5
- 15 YEAR FIXED - 3.25
- 5 YEAR ARMS - 3.0 - 3.50% depending on the lender
Ongoing Lock/Float Considerations
- The hallmark of 2014 has been a narrow range in rates. Too many market participants bet on rates going higher in 2014, and markets punished that imbalance with a paradoxical move lower.
- European markets helped that process along and continue to play a prominent role in keeping US rates lower than they otherwise might be.
- For most of the Summer and early Fall months, rates held a narrow range of 4.125% -4.25% (essentially where the 2014 rate recovery has bottomed out) and finally broke to a 3.875%-4.0% range in mid-October. It's too soon to tell if this is a brief window of opportunity or the continuation of 2014's very gradual improvements.
- 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, 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).