October 30, 2014
Mortgage rates pulled back to hold near 4 percent after rising to the highest levels in 3 weeks. After yesterday's Fed announcement, the most common rate quotes were at risk of edging up to 4.125% for top tier borrowers. While some lenders are still in that range today, the improvement keeps the balance tipped decisively toward 4.0%. In other words, both rates are out there today, but 4.0% is more prevalent. In general, rates are nearly back in line with Tuesday's.
Whether rates had simply had enough of their recent move higher or whether they're just more in tune with weakness in the European economy, today's stronger GDP report didn't have any impact. Typically, stronger data would push rates higher. That said, the resilience was nominal at best, keeping us in a limbo between 2014's previous lows and the the highs of the past 3 weeks. With the FOMC Announcement NOT creating the movement it might have, attention now turns to next week's big events (concentrated on Thursday and Friday) for the next potential dose of volatility.
Loan Originator Perspective
"Lender pricing improved this morning from yesterday's reprices for the worse. As i mentioned yesterday, lenders always tend to take away more in pricing than the price drop of MBS justifies. The benchmark 10 year note has a very supportive ceiling just overhead at 2.34, it is currently at 2.31. With the solid support just over head, and weakening data coming from Europe i would continue to float unless within 15 days of closing. Those loans i would be locking." Victor Burek, Open Mortgage
"After the Fed announced an end to QE yesterday, it appears the rate markets are treading water until finding more convincing motivation. That could happen next week as we get the all important Jobs Report as well as activity out of the European Central Bank. The bias seems to be to the upside now which lends me to believe locking these rates is prudent for now. Float carefully." -Hugh W. Page, Mortgage Banker, Seacoast National Bank
"We rebounded from yesterday's Fed related sell off today, but the gains weren't remarkable. It is still encouraging that the weakness was short lived. Rates remain within recent ranges, but more towards the higher end, which may give us some room to improve. It's a 50/50 float/lock call in my estimation. Those floating need to be keenly aware that pricing can change in either direction!" -Ted Rood, Senior Mortgage Originator
"The overall immediate short-term direction is higher. 2.34% on the 10 YR bond remains,at least in my opinion, to be a critical pivot point, support level and indication of a general larger shift in rates higher. Until we close above that threshold I will be optimistic we can see the recent rally continue. Shorter term technicals indicate to the contrary, as always, if you like your rate lock it. I am locking loans cleared to close." -Constantine Floropoulos, Quontic 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).