December 12, 2014
Mortgage rates improved again today rounding out an entire week of gains. They're nothing to shake a stick at, either. Although the most prevalently-quoted 30yr fixed rate for top tier borrowers will remain 3.875% today, 3.75% is making a solid showing. Right now, it's neck and neck with 4.0% for the 2nd place slot. These are the best rate sheets we've seen since late May 2013.
There's something special about "late May 2013." To be fair, it was especially awful as that was the beginning of the end for the golden era of low interest rates--a 1 year affair that saw top tier 30yr quotes between 3.25 and 3.75%. I will personally never forget May 22nd, 2013 as one of most jarring days of losses in mortgage rate history. That afternoon's article opened with "Mortgage rates were utterly destroyed today."
Of course utter destruction is a matter of perspective, but relative to where they'd been and the stability they'd enjoyed, May 22nd and several subsequent days in the following month really were among the biggest shocks ever seen in day-over-day mortgage rate movement. This week is significant because it got us back to the rates last seen on May 28th, 2013. The next few steps are massive, but if we get back to rates from the morning of May 22nd, we'll have effectively erased the taper tantrum. We'd be back in the range of the "golden era," albeit on the high side.
Should you take that as an indication that we're trending in that direction and an endorsement of floating until we get there? Heavens no. All the originator perspective is in alignment tonight, and I'd lean the same way as well. While it's true the longer term trend is intact, there's no way to be sure when the next course correction will arrive. Only borrowers with longer-term outlooks should be taking those risks. Anything else amounts to gambling with 50/50 odds.
Loan Originator Perspective
"Mortgage Rates hit their lowest levels of 2014 today. Do you want to lock today or hope for lower in the future? Personally, if I'd floated to the lows of 2014, I'd lock and move on. Sure, there may be further gains ahead, but we've moved lower fairly quickly and even if lower rates lie ahead...we're likely going to move higher before we move much lower." -Brent Borcherding, brentborcherding.com
"Today's rates are about as good as they have been in quite some time. I think there is some room for lenders to improve pricing, but i would encourage those within 15 days of closing to go ahead and lock. I like floating all other loans. If you do intend to lock today, hold off as long as possible to allow time for other lenders that haven't repriced yet to do so." -Victor Burek, Open Mortgage"
"While mortgage pricing has improved, it hasn't as much as might be expected, given today's events. Borrowers close to closing should take these gains and lock. Those further out may want to float, given a bit of risk tolerance and informed loan officer. "The trend is our friend!" -Ted Rood, Senior Loan Originator, MB Financial Bank
"Rates continue to improve and are currently at very attractive levels. While it is possible to see further improvements taking some market risk off the table by locking in after such a nice rally is not a bad idea. Should rates drop further you can always float down the rate. If you feel lucky and your lender did not re-rise this afternoon floating into Monday before locking is not a bad idea." -Manny Gomes, Branch Manager Norcom Mortgage
"Sub 4% 30 Yr fixed rates are back again and the longer term downward trend in rates continues. We know that history shows us that reversals in this trend will occur and sometimes abruptly so caution is necessary for borrowers who are floating their rate looking for more improvements. My advice if you're closing soon (15 days or less) is don't be greedy. Protect what pricing you have here and lock it up. Beyond 15 days, float with your finger near the trigger in case you need to pull it quickly." -Hugh W. Page, Mortgage Banker, Seacoast Bank
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).