October 7, 2014
Mortgage rates continued lower today at an exceptionally strong pace. The most prevalently-quoted conforming 30yr fixed rate for the very best scenarios has moved quickly from being worryingly close to 4.375% to being excitingly close to 4.0%. Officially, we're easily near the lower end of 4.125%, meaning that this is the most prevalent rate for the strongest borrowers and that the closing costs associated with that rate today are about as low as they get before 4.0% begins taking over.
The most interesting thing about the movement of the past two days is that there is no big-ticket headline motivating it. This is simply traders moving money for a variety of reasons. No one can know what all the motivations for that might be. Even the market participants themselves can only know about their own individual reasoning, but we can certainly make an educated guess based on the fact that the Minutes from the most recent Federal Reserve meeting are tomorrow at 2:00pm.
Certainly, this isn't the only market-moving consideration in play, but if some traders are expecting a rate-friendly tone, that could account for some of the extra 'oomph' behind the current push lower. It would also increase the risk of a volatile reaction after the data hits.
Loan Originator Perspective
"I feel pretty strongly about floating, at this time. There has been a considerable move lower for the 10 yr treasury, but mortgage rates haven't followed lower, just yet. If the benchmark 10 yr, simply holds at these levels, mortgages will not be far behind." -Brent Borcherding, brentborcherding.com
"I am somewhat pleasantly surprised by the strength we're seeing in mortgage pricing, however, I remain a little bit cautious for a snap back until we break convincingly through the lows of the year. We are near that point but still above it. So, being a cautious person, I still recommend locking up short term closings (15 days or less) to protect the gains we've experienced recently. Beyond that time frame, floating appears to be warranted unless we see a marked reversal that is accompanied by some sort of confirmation." -Hugh W. Page, Mortgage Banker, Seacoast National Bank
"Rates continue to improve which makes floating very easy to do. Mortgage bonds however are heading into over bought territory and stocks are close to being oversold. This increases the risk/reward of floating vs locking. If your lender repriced in the afternoon I would lock in. If not you may want to wait for better rate sheets in the morning to lock. " -Manny Gomes, Branch Manager, Norcom Mortgage
"The benchmark 10 year treasury note has broken a key level of resistance today, so my recommendation is to float. With 2.40 likely behind us, it is very possible that the 10 year hits new lows for the year in the near future. If you wish to lock today, hold off until later in the day to allow lenders time pass along the improvements. As always, lenders are very very slow in passing along improvements, but very quick to take away. Since rate sheets were released this morning, MBS are up quite a bit so reprices for the better should be coming." -Victor Burek, Open Mortgage
“Floating has paid off recently and the September bond market selloff is officially over. Maybe this is a sign of previous QE precedent , where rates tend to improve when the program comes to a close. With the stock market taking on some water lately as well, bonds are benefiting, which could indicate that 2014 rate lows are around the corner.” -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
"Solid gains for both MBS and treasuries today, as we broke 2.40 on the 10 year. Stocks are continuing to slide, and it appears that's not changing soon. The loan pricing I'm seeing today doesn't seem to reflect all the MBS gains, assume that's the case for other lenders as well. Bottom line, probably worth floating for the moment, given some moderate risk tolerance and an informed loan officer who is readily accessible." -Ted Rood, Senior Loan Officer
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 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.
- From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range of 4.125% -4.25% (essentially where the 2014 rate recovery has bottomed out).
- 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).