May 23, 2014
Mortgage rates didn't budge today--not one little bit. It's one thing for lenders to be adjusting rate sheets at various points in the day, beginning stronger, ending weaker, and ultimately averaging out to the same rates as the day before (as weas the case yesterday). It's another thing altogether for every lender to come in the door at the exact same rates the next morning and stick with them all day long. That sort of complete absence of movement stands in sharp contrast to almost any other day spent watching markets and rates, hence the "sharply unchanged" descriptor in the title.
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.
Today's lack of movement puts an exclamation point on more than a week of generally sideways rates. In the current case, being sideways is a good thing as it's occurring right around the lowest rates in 11 months (a few days in late October were marginally better, but other than that, we're looking all the way back to June 19th, 2013 to find better rate sheets). Markets are waiting to see if the European Central Bank will embark on a round of Quantitative Easing at their upcoming meeting.
There are other factors contributing to the narrow rate range, but in all cases, they'll be clearing up within two weeks. At that point, rates will either move higher or lower. Both sides have arguments, but neither has a decisive victory. Until that changes, the day-to-day trading range for rates should remain compressed by historical standards. That limits the incentives to float, but also decreases the risk.
Loan Originator Perspectives
"If I have to choose between today and Tuesday (after the holiday) I would gamble on Tuesday being better as most banks post higher rates on the last day before a long weekend. Everything remaining the same, rates will be better on Tuesday. If I'm looking at today vs late next week, I'd lock. There is still a great risk of rates rising than moving lower, for now." -Brent Borcherding, www.brentborcherding.com
"Mortgage rates seem to be waffling of late and we end the week right about where we started. Things will start heating up in the next 2 weeks on the economic data front which may give us some hints on the direction of rates near term. Then again, it may not. For those with short time frames to closing it appears prudent to lock. Longer than that you need to assess your risk tolerance and stay in close contact with your mortgage professional." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"A slow day in rate markets as anticipated today. We closed early, and although loan pricing improved slightly, overall we essentially treaded water into the holiday weekend. Although there is some economic data next week, the first week of June brings May's jobs report and an announcement from the European Central Bank, and traders will be closely watching both. Happy Memorial Day weekend, all." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"Mortgage bonds look to end the week where they began. This sideways pattern makes floating pretty easy to do but does add danger as well. If you are closing in the next couple of weeks locking ahead of a holiday weekend will take some uncertainty away and possibly protect you. If closing if further down the road floating still makes sense." -Manny Gomes, Branch Manager, Norcom 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).