October 24, 2014
Mortgage rates caught a break today and were able to ease just slightly lower heading into the weekend. This is somewhat refreshing because yesterday's bigger move higher was the kind of thing that historically results in further upward pressure. The gains weren't quite enough to get the average top tier rate quote back into the 3's for conforming, 30yr fixed loans. 3.875% and 3.75% remain viable for some borrowers looking to pay more money upfront in exchange for a lower monthly payment. In general though, 4.0% is the most prevalent quote today.
As it stands, it looks like rates are finding some equilibrium heading into a series of significant events next week. The biggest potential for movement will be mid-week when the Fed likely announces an end to QE3, the 3rd round of quantitative easing, widely credited with helping rates reach their all time lows.
Of course market participants are well aware of this probability and began adjusting for it as far back as last year's "taper tantrum" (when near record-low rates moved higher at one of the fastest paces ever recorded). Even so, there are past examples of markets being well aware of impending Fed news and still undergoing a volatile reaction when it finally comes out. While we may know what the Fed will do with a high degree of confidence, the market reaction is a never a guarantee.
Loan Originator Perspective
"I've favored locking for the last week, and today is the first day I'm getting the bug to float. Why? If, IF, we are still destined toward lower rates in the coming months, I think we've just reached the high side of the range and the next move will be lower. This move higher was nicer if our long term hope of lower rates is to be achieved. Remember, I said IF before, so if you decide to float, be ready to lock at the first significant move higher." -Brent Borcherding, brentborcherding.com
"Certainly feels like locking loans today would be a wise choice heading into next weeks potential game changing volatility. We are still in the range that warrants floating, and below specific pivot points that can trigger aggressive upward moves in rates, but I still think we are in the game. I am locking loans closing within a week, and considering to lock loans today for loans closing within 15 days only to avert any knee jerk movement next week that cannot be recouped in time for closing. " -Constantine Floropoulos, Quontic Bank
"Rates have been slowly drifting higher this week but we are still below a key level at 2.28 on the 10 year note. Helping yields to stay below that key level was news yesterday's of a doctor in New York with ebola. What makes this much more scarier than the news a couple weeks ago from Dallas, is New York is one of the most populous areas in the world. If we get any news of a 2nd person with ebola in New York, rates will most likely move lower. That said, i would float over the weekend and evaluate pricing on Monday morning. But as always, if you are happy with the terms of your current offer, go ahead and lock as that removes all risk. Only those who can afford to be wrong should risk floating." -Victor Burek, Open Mortgage
"Next week is setting up to be a potentially volatile period in mortgage rates with numerous imporant economic data releases and of course an important meeting of the Fed. It is widely expected the Fed will conclude it's bond purchase program but we'll also be looking for hints of any changes in the statement to guide us going forward. I am inclined to lock in rates now and especially those closing within 15 days. Floating longer lock periods seems risky to me but if you're sharply tuned in to the markets and your loan officer you may be able to be flexible. Risk abounds, however. " -Hugh W. Page, Mortgage Banker, Seacoast National Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.0
- FHA/VA - 3.5
- 15 YEAR FIXED - 3.25
- 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).