December 1, 2014
Mortgage rates were exceptionally low this morning. In many cases, lenders' rate sheets were stronger than those seen early on October 15th, making this morning's rates the best in over a year and a half. As the day progressed, times became tougher for MBS (the "mortgage backed securities" that underlie rate movement). Fortunately for MBS, the epicenter of the bond market weakness was in Treasuries. As such, mortgage rates didn't suffer as much, and the average lender remains in slightly stronger territory compared to Friday's conservative rate sheets. The most prevalently-quoted conforming 30yr fixed rate is still 3.875%.
Thanksgiving week is traditionally more volatile than the rest of November. Check! That worked to the advantage of mortgage rates this year. But the first week of December is also historically more volatile than average. Oftentimes, it counteracts whatever sort of trend was seen in the previous week. That's a risk we need to guard against as the days progress. Further weakness here should not be taken lightly with rates currently right in line with 1.5-year lows. The week's biggest events begin on Wednesday. That makes floating increasingly risky after today, but not necessarily insane if you're prepared to lock at a loss if markets move against you.
Loan Originator Perspective
"If you are tasked with locking in the next 4 business days, I'd suggest locking, as I think you'll see a slight bit of worsening throughout the week until we get the Non-Farms payroll report on Friday. If you have the next few weeks to float, you're taking a gamble by not locking the lowest rates in the last month. If you do so, float cautiously. " -Brent Borcherding, brentborcherding.com
"Recent improvements in mortgage pricing in the face of impending important economic data this week tends to steer my bias towards locking for now as risk rises. This is especially true for those closing within 15 days. If you choose to float for longer term closings it would be with the understanding that you need to be able to pull the trigger quickly if conditions warrant it so keep in close contact with your loan officer." -Hugh W. Page, Mortgage Banker, Seacoast Bank
"Despite the reprices for worse that have already hit today, I think locking in loans closing within 15 days is still prudent. If you are closing in more than 15 days, and like the terms of your current offer you should also consider locking. However, i think consumers closing in more than 15 days, will have another opportunity to lock at better terms than what is offered today but you will have to accept some short term volatility. If you can handle the ride, I would float longer term closings." -Victor Burek, Open Mortgage
"Rates sheets looked pretty good this morning and possibly good enough to lock if you are closing in the coming weeks." Manny Gomes, Branch Manager Norcom Mortgage
"This morning's rates were as good as I've seen in a year or so, and remained in strong territory despite pulling up in the afternoon. Now the question is whether we can hold current levels, or drift back up to last week's pricing. I locked several before the reprice, as MBS Live showed they were likely, and for now, I'm taking a locking bias until the bond/MBS selloff stops." -Ted Rood, Senior Loan Originator, MB Financial Bank
Today's Best-Execution Rates
- 30YR FIXED - 3.875
- FHA/VA - 3.25-3.5
- 15 YEAR FIXED - 3.125
- 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. After correcting back to 4.125% briefly, November saw a calm, supportive trend that helped establish a ceiling. From there, rates trickled back down into the high 3's by the end of the month.
- 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).