November 12, 2014
Mortgage rates began the day lower, but not too far from Monday's latest levels. As the day progressed, the bond markets that underlie rate movements grew progressively weaker. Most lenders put out negative "reprices" meaning they stopped accepting locks and released new rate sheets with higher costs. The afternoon's rate sheets were slightly worse than Monday's latest. This keeps the most prevalently-quoted conforming 30yr fixed rate in limbo between 4.0 and 4.125% for top tier borrowers.
There were no significant calendar events conspiring to push rates higher today, which is both scary and hopeful. It's scary because it can suggest an underlying, innate bias toward higher rates, but hopeful because there could be less conviction in that move compared to one that arises due to clearly-defined motivation. As long as we're not breaking into new recent highs, there is still some hope that a broader shift toward lower rates (the tacit suggestion from Friday's high-conviction gains) will materialize.
Loan Originator Perspective
"I favor floating overnight at this point. The 10 year bond auction did not go well, but we haven't seen any further negative momentum at this point. Tomorrow is the 30 year bond auction, and I'm looking to see a potential relief rally once the auctions are complete. As always, be ready to lock at any time, but I'm going to wait and see what tomorrow afternoon brings before I make a decision." -Brent Borcherding, brentborcherding.com
"We are still in a range that suggests we still have a fighting chance, but unless it changes soon, the current trend is indicating a move higher in rates. Loans closing within 15 days have more to lose than gain by not being locked in. 30 days + is optional, but may not be worth the risk vs reward variable." -Constantine Floropoulos, Quontic Bank
"For now, it appears to me that the risk of floating versus the potential of gains is neutral, and when that's the case, I typically lock and move on. Love to see a breakout to lower rates, but clearly it will take more motivation than we have seen recently." -Ted Rood, Senior Loan Officer, MB Bank
"Hopefully you were able to take advantage of this mornings rate sheets and locked. If you missed the opportunity, I would float at this point. Most lenders have already repriced for the worse so the damage has been done. To keep hope alive, tomorrow we have the final auction of the week. It is very common for bonds to rally once new supply has been absorbed by the markets." -Victor Burek, Open Mortgage
"In the near term it now looks like rates may head higher before they potentially head lower. If you you are closing in the next 30 days locking now is a safe bet. If you have longer to go and can stomach volatility you can float and wait and see of stocks give up gains which may help pressure rates lower." -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.0-4.125
- FHA/VA - 3.5-3.75
- 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).