May 22, 2014
Mortgage rates, once again, are ending the day essentially unchanged compared to the previous day. Morning rate sheets were in stronger territory, in some cases approaching those seen on May 15th (best day of the year so far), but market weakness caused some lenders to raise rates in the afternoon. This brought the average back in line with yesterday's. As such, the most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains 4.125%. Many lenders remain better-priced at 4.25%. "Better-priced" in this context, means that the combination of closing costs and contract rate (the actual interest rate at the top of a mortgage quote) presents better bang for the buck.
Interestingly enough, on paper, yesterday and today had the highest potential this week to see big market movements, yet they've both resulted in unchanged rates. While this can happen when major forces oppose each other and result in a stalemate, the current situation is more about a lack of conviction to move too quickly in either direction. That limits the reward for floating, but also decreases the risk, thus opening the door for more personal preference in the lock/float decision-making process. If you decide not to lock, just be sure to set a personal line in sand slightly higher in rate/cost, where you'd lock to avoid further losses. For instance, if you're at 4.25% now, and hoping for 4.125%, you might set your line in the sand at 4.375%.
Loan Originator Perspectives
"Worst than expected economic data helped mortgage rates improve this morning. The rate sheets I saw at open were pretty much in line with the best rates sheets of the year. As the day has progressed, treasury yields have risen slightly and as of about 3pm eastern a lender or 2 has already repriced for the worse. With a long weekend ahead(Memorial Day is Monday and markets are closed), I would continue to advise those within 15 days of funding to go ahead and lock. I would float all other loans until the market opens on Tuesday. It seems to me that lenders tend to be conservative with their pricing ahead of a long holiday weekend which would make me relunctant to advise anyone to lock tomorrow, but we will have to see what happens." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.125%-4.25%
- FHA/VA - 3.75-4.0%
- 15 YEAR FIXED - 3.25-3.375%
- 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. From there, they settled into a flat range mostly consisting of 4.375 and 4.5%, but with occasional forays to 4.25 and 4.625%.
- While the bias had been very slightly toward higher rates, it reversed course in April and rates returned to the lower end of the range by May 1st. As the "weather effects" fall out of the spotlight, market participants are seeing a bit more organic weakness in the economy than they'd expected.
- Earlier in May, the focus looked to be returning to economic data, but that proved short-lived as prospects for European central bank easing overwhelmed some of the incoming data, pushing rates lower while data suggested a move higher.
- As of the third week in May, rates were as low as they've been since June 2013, more than confirming a break below the 2014 range.
- Looking back at recent movement, it's had a disconcertingly small amount to do with 'normal stuff' like economic data and Fed policy. Temporary and unpredictable factors currently account for too much of the movement to make firm bets on rates moving either direction in the short term.
- (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).