April 22, 2014
Mortgage rates drifted higher for the second straight day despite a relatively flat day for underlying bond markets. Rates pushed into their 2-week highs yesterday, but are still well under the levels seen in the first week of April. Today's weakness didn't have an effect on contract rates, but it did make for slightly higher closing costs. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains at 4.5%. When adjusted for day-to-day changes in closing costs, today's rates are 0.02% higher.
In determining your personal approach to the mortgage rate environment in 2014, the sideways range that we've seen since mid January is the most useful road map. Within that range, the average top-tier mortgage rates have been centered on 4.375 to 4.5% most of the time. The strongest moves lower have been to 4.25% and the strongest moves higher to 4.625%. In general, spending any amount of time at those extremes has made it increasingly likely that a move in the other direction is coming.
With that in mind, we just spent the better part of a week at the 4.25% level and are back up to 4.5% now. Every time that's happened this year, rates have gone slightly higher before returning to mid-point of the range. Of course mortgage rates won't always be drifting sideways between 4.25 and 4.625, and past precedent doesn't guarantee a repeat performance, but if you want to bet on the status quo, floating is risky in the short term. Keep in mind the same status quo also suggests that any short term move higher would end up coming back to current levels or better eventually.
Loan Originator Perspectives
"Not much going on with rates as they are holding steady in a very tight range. With auction supply hitting today, it is common to see rates worsen slightly, but once the supply is out of the way it is also common to see rates rally. If you have been floating, I think floating through the auction cycle could pay off, but be prepared to see some losses before the gains. As always, nothing wrong with locking if you are happy with the current terms being offered." -Victor Burek, Open Mortgage
"The bond market was for the most part flat today while equities headed higher. It looks like rates are nearing the top end of the range they have been in for months while stocks are doing the same. If the top end of the range proves once again to be a ceiling against further advancement, rates may start heading lower. I would recommend floating especially if closings are weeks away. " -Manny Gomes, Branch Manager, Norcom 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 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).