Mortgage rates fell to their lowest levels in roughly two weeks this morning.  That's a seemingly positive statement, but while it's true, there are also several catches.  The first is that the recent range of rates has been exceptionally narrow, so it didn't take much of a movement to earn the "lowest in 2 weeks" designation.  The even more important caveat is that bond markets moved into weaker territory this afternoon.  Let's examine why that's important.

Mortgage rates are primarily driven by the bond market.  When bonds are weaker, rates rise and vice versa.  But mortgage lenders don't immediately change rate sheets every time the bond market fluctuates.  It takes a certain amount of weakness to prompt lenders to 'reprice.'  Today's level of weakness was just enough for a few lenders to raise rates in the middle of the day.  Any lender who didn't reprice will need to adjust tomorrow morning's rate sheets accordingly.  

Bottom line: all things being equal, mortgage rates begin tomorrow at a disadvantage (unless your lender already took their lumps today).  Combine that with the potential volatility associated with Friday's big jobs report and it's easier to make a case for locking vs floating in the short term.

Loan Originator Perspective

"With rates still holding inside their recent range, there's no reason to rush to lock or float (yet).  Friday's employment report can always be a game changer, but I am of the opinion that rates have yet to see their lows for the year.  That said, loans with less than 15 days to close should consider locking to avoid any volatility." -Constantine Floropoulos, VP, The Federal Savings Bank

Today's Best-Execution Rates

  • 30YR FIXED - 3.75%
  • FHA/VA - 3.25%-3.5%
  • 15 YEAR FIXED - 3.00%
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

  • The Fed finally hiked on December 16th, causing fears of rising rates in 2016, but markets began the new year with rates moving surprisingly lower.  Major losses in stocks and oil prices were part of the same trend of investors moving away from risk.
  • After bottoming out fairly close to all-time lows in February, rates have seen only brief episodes of volatility in a low, narrow range.  

  • The Fed's most recent announcement at the end of April reinforced their cautious approach to rate hikes.  This helped rates improved through mid May
  • Now some investors are getting concerned that the Fed may be more prepared to hike rates than markets currently expect.  This could create volatility and pressure toward higher rates heading into the June Fed meeting, thus favoring locking vs floating.
  • 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).