April 16, 2014
Mortgage rates were slightly higher today as investors continued to pull back from yesterday's geopolitically motivated buying spree. Tensions in Ukraine had created a short term spike in demand for fixed income securities like Treasuries and the mortgage-backed-securities (MBS) that most directly influence mortgage rates. Higher demand means lower rates.
As we saw yesterday, that spike in demand led to moderate improvements in rates, but had already started fading by the end of the day. This morning simply continued in that same vein, resulting in higher mortgage rates. That said, the weakness has been merely moderate. Weaker housing data helped to prevent further bond market weakness (bonds tend to improve when economic data is weaker than expected).
The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains centered on 4.375%. Some lenders are close to 4.25% and fewer still are at 4.5%. When adjusted for day-to-day changes in closing costs, today's rates are 0.02% higher. Despite the modest weakness, rates are still much closer to their recent lows than they are to the highs seen in early April.
Loan Originator Perspectives
"My position is one of extreme caution. Our rates/points combinations have been improving, despite often positive economic news. Is there a herd mentality moving markets... yes. Do you want to be on the wrong side of the herd, chasing you down...no. Lock if you like your rate, don't chase the best rate possible.. you likely won't get it." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
"Increasingly, it looks like something big will need to happen overseas or in the domestic economy in order for rates to move below their recent range. I don't think it's prudent to bet on a big event to get us there. Considering we're still closer to the lower end of that range, locking is the best call. " -Steve Chizmadia, Mortgage Consultant, American Capital Home Loans
"LOCK--We remain very close to the lowest points in the last 3 months, until we see a significant move, confirming a break lower, I still believe locking is the best decision. Risk vs reward, and currently the greater risk is to higher rates." -Brent Borcherding, www.brentborcherding.com
Today's Best-Execution Rates
- 30YR FIXED -4.375%
- FHA/VA - 4.00%
- 15 YEAR FIXED - 3.375%
- 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 took 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.
- Barring surprises, even within the very narrow trend from January through March, we've seen a slight bias toward higher rates. It will take economic or geopolitical surprises to push back against that momentum.
- (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).