October 27, 2014
Mortgage rates were almost perfectly unchanged over the weekend. Most lenders are still right in line with Friday's most prevalently-quoted conforming 30yr fixed rate of 4.0% for top tier borrowers. That said, most of those rate sheets also still have reasonable costs for borrowers interested in paying more upfront for a lower rate. For instance, the time required to break even on additional upfront costs is roughly 5 years when moving down from 4.0 to 3.875% or 3.75%, depending on the lender.
Today was uneventful in terms of movement in the markets that underlie mortgage rate changes. The rest of the week, however, stands a good chance to be increasingly volatile. Wednesday afternoon's Fed Announcement is the main event in that regard. The Fed is widely expected to confirm the end of the asset purchases associated with its 3rd round of quantitative easing (QE3). While that won't be a surprise if it happens, it will require additional verbiage changes in a statement that hasn't been forced to undergo any meaningful changes in months.
Loan Originator Perspective
"We had a decent start to a potentially interesting week today. Both MBS and treasuries improved slightly, and my rate sheets look marginally better than Friday's. The gorilla in the room is Wednesday's Fed statement and the presumed end of QE3. Floating borrowers need nerves of steel in situations like this, and those choosing to float will want to have their loan officers on speed dial Wednesday afternoon when the Fed statement is released." -Ted Rood, Senior Loan Originator
"Wednesday's FOMC Announcement can, of course, send markets flying in either direction. This creates a need to be a bit more defensive for loans closing within 15 days. That said, we've seen rates move quite a bit higher since recent lows, thus leaving some room for optimism as long as you're ready to lock quickly if the market is moving against you. " -Constantine Floropoulos, Quontic Bank
Floating into the Fed statement makes the most sense. If rates are able to improve ahead of it, you can take advantage of the better pricing should the market reverse upon release of the statement. Should bonds advance after the statement you will be able to continue to float and wait for better pricing." -Manny Gomes, Branch Manager Norcom Mortgage
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).