December 10, 2014
Mortgage rates moved only slightly lower today, but it was enough to bring the end-of-day average to the lowest in more than a year an a half. For the record, there were lower rates available on the morning of October 15th, but markets moved so much during the day that the last rate sheets of the day weren't quite as strong as today's. Similar rates were also seen at the end of the day on December 1st.
Today's strength is most readily seen as a factor of weakness elsewhere--namely oil and stocks. It's not that either of these has a reliable, direct connection to rates, but generally speaking, when stocks are selling as much as they were today, bond markets tend to pick up some of that money. When bond markets improve, prices move higher and yields (or "rates") move lower.
The only caveat is that the process takes a bit longer to play out for mortgages, and doesn't generally happen on the same scale as a more mainstream bond market component like US Treasuries. Because of this, mortgage rates spent much of the day flat--even slightly worse than yesterday. Mid-day improvements in the broader bond market were finally big enough for lenders to revise rate sheets lower, further solidifying 3.875% as the most prevalently-quoted top tier conforming 30yr fixed rate. 4.0% remains not far behind.
Loan Originator Perspective
"As i suspected yesterday, we had some pre auction weakness resulting in slightly worse rate sheets this morning. Today's 10 year auction was well received pushing yields to their best levels of the day. With the final auction of treasuries happening tomorrow, I think floating all loans overnight is the way to go. Very often we see rates rally once the new supply of debt has been absorbed by the markets. If you do wish to remove all risk by locking today, wait as long as possible to see if lenders pass along any of the post auction gains." -Victor Burek, Open Mortgage
"Rates held steady, and in some cases saw some slight improvement today. We have one more auction tomorrow and with the passing of the 30 year auction, we could have the potential for a relief rally. I see the potential for improved rates, with less risk of them rising. I still maintain that floating day to day is a risk worth taking, right now." -Brent Borcherding, brentborcherding.com
"Mortgage bonds found their footing after the strong Treasury auction. Given the steep sell off in equities I would have liked to see a stronger rally from mortgage bonds. This either indicates traders are tired and future gains could be minimal or traders are waiting for more confirmation before the next push higher in prices and lower in rates. This confirmation may come via tomorrows 30 year treasury auction. Float into tomorrow but do be ready to take action." -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.875-4.0
- 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).