March 26, 2014
Mortgage rates improved substantially today, at least in the context of small day-over-day movement seen since last week's Fed Forecasts sent rates quickly higher. While they're not quite back to Wednesday morning's levels, they're much closer than they have been any time since.
The underlying market gains fueling the drop in rates came in waves today. That set up a situation where almost every lender released lower rates in the late morning and afternoon. Some lenders repriced twice! Even so, it wasn't quite enough to move the most prevalently quoted conforming 30yr rate for top-tier scenarios (best-execution) below 4.5%. A few lenders are already at 4.375% though. When adjusted for day-to-day changes in closing costs, rates fell by 0.03 percent today.
Today's improvement marks the 4th day in a row that rates have either held steady or improved. Those are the sorts of streaks that increasingly invite a correction of some size very soon. It could be tomorrow or it could continue for several more days. The point is that each day of improvement makes a correction more likely.
The challenge lies in knowing whether or not the correction is a speedbump or a brick wall. Fortunately, you don't have to be able to predict the future to capitalize on the behavior. For those inclined to continue floating, simply set a line in the sand at some higher rate or cost from the past 4 days and lock if rates move back up to those levels. Whatever you do, keep in mind that the recent movements have been relatively small compared to what we may see if next week's economic data is decidedly strong or weak.
Loan Originator Perspectives
"Oh Spring has sprung! Well for mortgage rates at least. But we know that there can be and are Spring storms. If you like what you see, lock it." -Bob Van Gilder (BVG) Finance One Mortgage
"An A+ auction today provides hope that we would see the same tomorrow in the 7 year, and I'm hopeful we will. That said, finding your time to lock should be this week, as I think next week I think we'll move back up into the Jobs Report on Friday. The last couple of days have been good to us and taking those benefits today or tomorrow seems wise." -Brent Borcherding, Capital M Lending
"Today's 5 year treasury note auction was a home run. Once the results were released, MBS and treasuries both rallied. As of mid afternoon just about every lender has repriced for the better. I am continuing with my recent strategy of locking once you are within 15 days of closing. A 15 day lock offers better terms then a longer term lock." -Victor Burek, Open Mortgage
"“Rates are looking better after a rough time last week due to the surprise rate talk from the Fed last week. After time to digest the realities, rates may not move up as quickly as Yellen had indicated. However, with the jobs report next week, we could see some volatility return. After lackluster jobs reports recently, weather may no longer get the nod as a big contributor to weaker hiring and a big rebound could spark a rise in rates.”" -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
"Green day today for rates as we improved after a very strong 5 year treasury auction. We're still operating within recent ranges, but trending towards the low end. Tomorrow brings weekly jobless claims, which can impact race, albeit not to the extend of the monthly employment report which hits April 4th. Lock/float a bit of a coin flip at this point for risk tolerant borrowers." -Ted Rood, Senior Mortgage Planner, Wintrust Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.5%
- FHA/VA - 4.00%
- 15 YEAR FIXED - 3.5%
- 5 YEAR ARMS - 3.0-3.50% depending on the lender
Ongoing Lock/Float Considerations
- The Fed has stayed the course on their $10bln per meeting reduction in bond buying, though markets have handled it relatively calmly compared to the days of "coming to terms with tapering" in 2013.
- Rates fell significantly in January, leveled-off in February and have been taking choppy steps higher in March
- Some mitigating factors had kept rates from moving too far out of a narrow range, including the uncertain impact of weather on recent economic data as well as geopolitical risk surrounding Ukraine
- As soon as investors can have more confidence that the incoming data is an accurate representation of economic conditions, we should see more willingness for rates to react accordingly, with weaker data helping keep rates lower and stronger data pushing them back toward January's highs.
- That confidence is increasing in March with a strong jobs report and more aggressive forecasts on rate hikes from the Fed. Ukraine has offset that somewhat, but the general trend continues to be toward higher rates.
- (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario. There are many reasons a quoted rate may differ from our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).