Mortgage rates drifted inconsequentially higher to end the month, remaining well-within the recent range, albeit closer to the higher end. The most prevalently-quoted conforming 30yr fixed rate remained 4.0%, with 4.125% not too far behind.  On average, rates were just slightly better than Wednesday's, though a few lenders were at their highest levels in weeks.

Today's big consideration for financial markets was surprise news that the Bank of Japan voted to increase its quantitative easing (QE) program to 80 trillion Yen per year (just over $720 billion).  Relative to the size of Japan's economy, this is at least twice as aggressive as QE in the US, and consequently made for a big market impact.  Because Japan's QE program includes stocks, that was the scene of the greatest volatility, but stock market gains often take a bit of a toll on bond markets, resulting in higher rates. 

All things considered, bonds--especially the Mortgage-Backed-Securities (MBS) that govern mortgage rates--held up quite well.  In other words, this is one of the few instances where a bad day for rates may actually turn out to be good in the long run.  Volatile market conditions put bond markets to the test, and provided them an opportunity to display some innate resilience

Next week is not without its own market movers though.  Europe continues to be a major consideration for US rates and the European Central Bank releases their policy announcement on Thursday.  One day later, the biggest piece of economic data for the US will be released--The Employment Situation.  Either of these events are capable of giving rates a solid push higher or lower, depending how they go.  The conclusion is that lock/float decisions should be carefully reevaluated by the middle of next week.


Loan Originator Perspective

"I favor floating at these levels. It appears that we've found some stability after selling off the past week, and I think this may be the high side of rates for the next week or so. I would definitely advise waiting until Monday versus locking today." -Brent Borcherding,

"Big news out of Japan last night has sparked a huge world rally in stocks. Typically, when stocks rally you would expect bonds to sell off (which increases rates). Bonds are weaker today (higher rates), but far less than what you would expect with the Nikkei up 5% last night, Europe up over 2% and US stocks up 1%. The ceiling on the 10 year treasury note of 2.34 has held up and buyers have emerged each time it was tested. Following the strategy of lock the lows float the highs, I favor floating all loans over the weekend." Victor Burek, Open Mortgage

"I was very impressed by mortgage bonds' resilience this week and especially today as stocks mounted huge gains. Equities have moved up very fast and are possibly due or a pullback. Should we get that pull back bonds should benefit and rates can possibly move lower. Today is Halloween but I do not find it to scary to float over the weekend :)" -Manny Gomes, Branch Manager Norcom Mortgage

"Rates held up fairly well today in the face of continued stock gains. My rate sheets were slightly off yesterday's, but not enough to impact most loans. Japan announced a huge new QE program, remains to be seen how that will impact rates here. Bottom line: we're still in current ranges, and there's nothing wrong with that." -Ted Rood, Senior Mortgage Originator

"Huge shake-up for markets with Japan adding more stimulus. It's become so redundant to see equities rally heavily on the fact of more money coming in to stimulate the economy, and later on watching it all unwind into bonds. Overall a much more bullish picture either way for all asset classes and debt. 2.34% on the 10 YR has proven to be of substantial importance, I would keep a close eye on how we fair out when markets close. If 2.34 stays intact, I am a firm believer in floating through and through and better rates/spreads are coming. As of now I am locking loans cleared to close, and potentially 15 days out heading into the weekend." -Constantine Floropoulos, Quontic Bank


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).