October 22, 2014
Mortgage rates had their single flattest day since October 2nd today. This is the polar opposite of last week's exceptional volatility. The most interesting thing about it is that this is the way rates typically respond to that kind of rapid movement. It goes something like this: one day, in particular, sticks out as utterly insane and the ensuing days get less and less insane until the insanity completely dries up.
Last Wednesday was ground zero for insanity, and today there's none to be found.
The second most interesting thing about that is that it usually results in the resumption of movement after days like today. History suggests that movement can be in either direction. That's good news for risk-takers inclined to float as it would minimize the losses incurred if markets move against you. It's worth mentioning though that rates are so close to 16-month lows that there's absolutely no reason to regret locking today, or any time in the past 7 days. Depending on how tomorrow turns out, it might even be the best choice.
The most prevalently-quoted conforming 30yr fixed rates continue to be 3.875% and 4.0%. Borrowers at aggressively-priced lenders with flawless scenarios and 25% equity are much more likely to see 3.875%. Even if you're being quoted 4.0%, the costs associated with buying down your rate to 3.875% (or even 3.75%) are much lower than those associated with moving down from 4.125 to 4.0%. In other words, when the average rate was 4.125%, it made less sense to consider paying points for a lower rate because it would have taken longer to break even on the additional cost--roughly 8-10 years. The breakeven time frame for moving from 4.0 to 3.875% is only about 5 years for most lenders.
Loan Originator Perspective
"Rates continue to trade sideways. Any sell off is met with buyers and any rally is met with sellers. The rates market continues to look for direction; however, the overall trend still favors lower rates to come. I continue to favor floating loans til within 15 days of funding. " Victor Burek, Open Mortgage
"Borrowers with some risk tolerance and longer time horizons would still be well within the scope of sanity to float. It's important to note that shorter lock terms, by definition, have better pricing.....a 15 day lock will be priced better than a 30 day for almost every lender. One advantage of NOT locking over 30 days from closing is that even if rates remain the same, you gain some pricing with the shorter lock term. As always, if you're stressing over rates, losing sleep, or yelling at the dog for no reason, you could do much worse than locking now. " -Ted Rood, Senior Mortgage Originator
"Another sideways/quiet/boring day for interest rates. This is actually an amazing time as any form of volatility causes concern. The ideal situation is for rates to move lower but if the worst case scenario is we stay flat at these levels, I'm a happy camper. I still think we move lower, only locking loans cleared to close. " -Constantine Floropoulos, Quontic Bank
"A week that has thus far shown very little change continues. One thing we know is that this is not likely to continue indefinitely so if your closing is within 15 days and you like the pricing you have now I don't see any sense in waiting anymore to lock your rate. Beyond 15 days, floating seems like it's okay for now but stay connected to your loan officer who is hopefully paying close attention to markets." -Hugh W. Page, Mortgage Banker, Seacoast National Bank
"Rates remained flat again today. Mortgage bonds were unable to move higher as stocks sold off today. This sideways pattern will not last for long and rates will break to the upside or possibly decline. It is time to take risk off the table and lock in. Should rates decline you can always renegotiate the rate. Should they increase you are protected. " -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.875-4.0
- FHA/VA - 3.5
- 15 YEAR FIXED - 3.125
- 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).