Mortgage rates were sideways to slightly lower today, keeping them in line with the lowest levels in more than three years.  While there are a few aggressive lenders quoting 3.5% on conventional 30yr fixed loans, 3.625% is the most prevalent quote on top tier scenarios.  3.75% had been more common until last week's jobs report sent rates quickly lower, and all but eliminated the possibility of a Fed rate hike in June.  The Fed Funds Rate does not directly dictate mortgage rates, but increasing expectations for Fed rate hikes tend to coincide with increasing mortgage rates.

When rates have been near these 3-year lows, we've only seen them dip lower briefly--and usually not by that much.   That means locking is never a bad idea at current levels.  Even so, risk-takers could also find justification to float based on the hope that European markets continue to pull US interest rates lower as the European Central Bank (ECB) begins a new bond-buying program tomorrow.  As always, if you choose to float, set a limit as to how much rates would have to rise before you'd lock to avoid further losses. 

Loan Originator Perspective

"I continue to favor floating all loans right now.   The benchmark European bond, the 10yr Bund, set new record lows today ahead of the ECB corporate bond buying which is set to begin tomorrow.  I think it is worth the risk to float overnight to see how that impacts the Bund which will have an impact on US Treasuries.  Today, the Bund helped push the 10 year to about a 1month low."  -Victor Burek, Churchill Mortgage

Today's Best-Execution Rates

  • 30YR FIXED - 3.625%
  • 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

  • Markets are primarily concerned with the timing of the Fed's second rate hike (after they first hiked in December 2015)
  • After bottoming out fairly close to all-time lows in February, rates have been in an increasingly narrow range just above all-time lows  

  • Fed hike expectations come and go, creating volatility within that low, narrow range.  Things won't get serious until we actually break out of that range.
  • After fears increased that the Fed would hike in June, the current flavor of the month is that they'll hold off until at least July.  This has helped rates move back toward the lower end of that long term range.  These have historically been good locking opportunities in 2016 (because rates tend to rise back toward the higher end of the range shortly after hitting the lower end).  That trend won't continue forever, but until it is broken, it provides a useful way to know how advantageous current rates are, relative to other recent offerings.
  • 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).