May 27, 2014
Mortgage rates were slightly higher this morning, but mid-day market improvements led many lenders to adjust rates lower into the afternoon. The net effect ends up being "no change" to Friday's latest rate sheet offerings.
While a return to unchanged levels isn't unheard of, this is now the 5th day in row with the exact same average mortgage rate. That's only happened one other time since we began keeping records in 2009. Simply put, rates have been extraordinarily sideways, and right in line with the lowest levels in 11 months.
The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) is unchanged at 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.
Markets are waiting for some key events on next week's calendar, and rates will almost certainly have made up their mind by then. For now though, there are arguments against moving too far in either direction. Until that changes, the day-to-day movement should remain contained, thus limiting both risk and reward for floating.
Loan Originator Perspectives
"LOCK--I sitll favor locking until there is a significant move lower, as the greatest risk remains toward higher rates. It's truly amazing that we've remained in this tight range this low for the last few weeks, I'd take advantage of what's nearly the best pricing in 6 months." -Brent Borcherding, www.brentborcherding.com
"Rate sheets at the open today were slightly weaker than what we had on Friday. As the day has progressed, mortgage backed securities have rallied to their best levels in about a year, but lender pricing has not caught up. Unless your lender passes along a healthy reprice for the better, I would float overnight then look to lock in if within 15 days of funding." -Victor Burek, Open Mortgage
"Nothing has changed in the interest rate environment to change my outlook on locking anything closing in the short term. With the increase in important economic data pieces ramping up over the next week and a half, however, it is important to keep in close touch with your mortgage professional. This is especially true as we get in to the critical Non Farm Payrolls (aka Jobs Report) a week from this Friday. Things could get interesting very quickly." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"Bit of post-holiday lethargy in rate markets today. Pricing did improve slightly, building on last week's gains, but without breaking any significant new ground. Next week holds May's NFP report and European Central Bank news, and may hold the key if rates are to further improve. "Watchful waiting" is likely the way to go for borrowers over 30 days from closing. Those closer may want to lock up gains, depending on risk tolerance." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"Rates remained for the most part unchanged today as the sideways trade continues. The bond market is looking for a catalyst to move it either direction. Floating as we wait for this catalyst buys us time but also leaves us vulnerable should rates spike higher. I would lock if you are risk averse but float if you are able to stomach volatility and have time on your side. " -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).