November 3, 2014
Mortgage rates continued higher today, edging up to their worst levels in nearly a month. The most prevalently-quoted conforming 30yr fixed rate for top tier borrowers is currently a toss-up between 4.0 and 4.125% depending on the lender. Whereas it had been compellingly affordable to pay extra upfront cost to move below 4.0%, those so-called 'buydowns' no longer make much sense.
Most of the time, when rates are at periodic highs like this, there will have been a notably intense day or two of weakness at some point during the move up--some driving force helping to accelerate rising rates. This time, however, the weakness has been remarkably linear because the driving force was simply that rates had fallen so much by mid October. Everything that's followed has been a scripted correction back to what had been the best rates of the year this time last month.
With no fundamental driving force behind recent weakness, it begs the question of whether rates have risen enough to satisfy the underlying market correction. Based on how far that correction has come, this week may well be when we find out if October marked a sustained move into a lower rate range or if it was just an aberration.
Loan Originator Perspective
"I'm going strictly off my gut here when I say float until tomorrow. Today doesn't really add any clarity as to whether rates are moving higher or lower, though they are slightly worse. If you floated from Friday until now, stay the course." -Brent Borcherding, brentborcherding.com
"This week has the potential for some significant movement and so far things have not started off in a positive direction. A lot can change, however, as we have the Jobs Report on Friday, European Central Bank activity on Thursday, and other data points to be released as well as continued fallout from the Bank of Japan announcement last week. All of this presents uncertainy so a bias towards locking seems to be warranted." Hugh W.Page, Mortgage Banker, Seacoast National Bank
"Mortgage bonds lost some ground today but are hugging support. Should equity prices convincingly break through to new all time highs rates may suffer. Should equities fail to break higher they may sell off and bonds should benefit. It is a bit to early to call but floating and waiting may lead to a good lock opportunity in the days to come. Do be very vigilant should you float for if equities do head higher rates will be following. " -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).