Mortgage rates rose modestly today, despite improvements in underlying bond markets.  This was in line with our discussion about "the catch" associated yesterday's improvements.  Specifically, bond markets had weakened enough in the afternoon to suggest higher rates, yet many lenders didn't adjust yesterday's rate sheets.  As such, we expected to see that weakness baked-in to today's rate sheets and indeed it was.  In other words, rates were more likely to start out higher today, all other things being equal.

All that having been said, we're talking about a very small change in a very small range.  The average lender continues to quote conventional 30yr fixed rates of 3.75% with some of the stronger lenders still down at 3.625%.  Any changes have taken place in the form of the upfront closing costs (or credits) associated with prevailing rates.

Tomorrow brings the Employment Situation report, widely regarded as the most important piece of economic data on any given month.  This report has a long tradition of causing big moves for interest rates, but its power has recently been muted by shift in the market's focus.  Investors are more concerned with the Fed's next move and the Fed is more concerned with inflation and global economic stability.  Everyone is well aware that payroll creation has been strong.  So while the bond market may have a volatile initial reaction, bigger picture shifts will have to find inspiration elsewhere.

Loan Originator Perspective

"We traded into the absolute lowest realm of the recent range through midday today. This is indicating to me the smart money is betting on an average or poor employment number tomorrow. I favor floating anything not set to close in 10-15 days." -Constantine Floropoulos, VP, The Federal Savings Bank

"After moderate gains today, MBS prices are now up significantly over the past three days.  It's unusual to see multi-day rallies the week of NFP report, the fact we have may be indicative of how much global, rather than domestic, economic conditions guide mortgage rates.  Despite the rally, we're still within recent ranges, and closer to the low end for rates than the top.  If you're floating at the moment, and don't want to risk losing ground, time to pull the trigger and lock.  If you're comfortable with some risk, you might see improved pricing if NFP fails to meet projections.  I'm neutral on locking July closings at this point, but my June files are all locked, clients sleeping soundly at night." Ted Rood, Senior Originator

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).