October 2, 2014
Mortgage rates were mixed today, depending on the lender. Some rate sheets were slightly better or worse than yesterday's latest, but the broader average was unchanged. This happened in spite of weakness in bond markets. This includes mortgage-backed-securities (MBS), the bonds that most directly affect mortgage rates.
Losses in MBS almost always correspond with rates moving higher, but in yesterday's case, the gains were so precipitous that the benefits hadn't fully translated to rate sheets by the end of the day. That left lenders some wiggle room this morning.
The most prevalently quoted conforming 30yr fixed rate for top tier borrowers remains 4.125% for a second day. Until yesterday, September's weakness had kept that rate at 4.25% for several weeks. Differences from yesterday would be seen in the form of closing costs.
Tomorrow brings the most important piece of economic data of any given month. The Employment Situation Report, which includes 'nonfarm payrolls' and the unemployment rate will start the day off at 8:30am--well before lenders' generate the first rate sheets of the day. Even though financial markets have shown some disregard for economic data in general, this report is still likely to generate an initial response. If the previous month's somewhat weaker numbers are revised higher in addition to stronger numbers in this month's headline, rates would likely be higher right out of the gate.
Loan Originator Perspective
"If you need to lock today or tomorrow, the safe decision is today with Non Farms Payroll looming. If your horizon to lock is further out, than I would float, but do so cautiously, as always. We appear to be deeply entrenched back into the year long trend channel toward lower rates and I believe that lower rates are ahead." -Brent Borcherding, www.brentborcherding.com
"Draghi disappoints again, but bonds are benefiting from a stock sell off. Tomorrow brings us the most important economic data that we get on a monthly basis. Market is expecting about 215,000 jobs created, but will also be looking for the prior month to be revised higher. Anything short of that should allow bonds to at least hold onto the recent gains. Floating through the payrolls report is always risky. Take your risk tolerance into account and float or lock accordingly." -Victor Burek, Open Mortgage
"Lock!! If you have been floating now is the time to protect your self. There is more to lose than potentially gain heading into tomorrows jobs report. We have had a great run in recent weeks and the danger of profit taking is very high. Stocks are also oversold and can rebound higher. " -Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.125
- FHA/VA - 3.75
- 15 YEAR FIXED - 3.375-3.5
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The hallmark of 2014 so far has been a disconcertingly narrow range in rates. Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower.
- As of June, rates are now lower year-over-year, but that's mostly due to rates' path higher in 2013. The current path in 2014 remains sideways, though it has recently approached (but not broken) the lows set in late May
- European markets continue to play a prominent role, generally helping rates in the US remain lower than they otherwise might be.
- From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range. While top tier rates moved up an eighth of a point in early September, to truly move out of the "narrow range," we'd need to see another .125% higher (best-execution at 4.375%)
- 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).