April 23, 2014
Mortgage rates moved lower at a healthy pace today, more than erasing the past two days of weakness, but leaving most of last Thursday's weakness intact. Some of the gains were attributable to today's much weaker than expected reading on New Home Sales earlier this morning. Downbeat economic data is typically positive for bond markets which results in lower rates. Today's strength is enough to bring the most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) back down to 4.375% in many cases, though 4.5% remains a nearly equal contender. When adjusted for day-to-day changes in closing costs, today's rates are 0.06% lower.
Today's strength runs counter to the recent trend. Most of the time in 2014, when rates have risen from 4.25%, they've proceeded to 4.625% before coming back to the 4.375%-4.5% range. This time, they never even left that central range. The positivity is hopeful at best, but at the very least, it affords some breathing room for anyone looking to be more aggressive when it comes to holding out for lower rates. Those borrowers could use yesterday's rates as a stop-loss (meaning they could float in the hope of lower rates and commit to lock if rates make it back to yesterday's levels).
Loan Originator Perspectives
"So far this week, the economic data has supported lower mortgage rates. Tomorrow we get jobless claims and the last round of treasury auctions for the week. So far the auctions have been so so, but hasn't scared the markets. Quite often following the last auction we get a nice rally, hopefully that will happen tomorrow. Additionally, rhetoric is building in Ukraine which could also lead to a flight to safety trade which would benefit rates. Pricing is a little better this morning, but if you can tolerate a little more risk, I would float overnight to see if we can extend today's gains." -Victor Burek, Open Mortgage
"Unless there is a dramatic move up or down in the stock market, rates are stuck in a sideways grind. I always favor locking at application as insurance against a sudden rise in rates. Since renegotiation options exist, a rate drop won't lock you out of the gains entirely." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
"Today's Treasury auction results were not the best, but it did not keep yields from dropping and mortgage bonds from moving higher after not doing much the last few sessions. If you have not locked yet, I would continue to float." -Manny Gomes, Branch Manager, Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED -4.375 -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).