June 13, 2014
Mortgage rates staged a modest comeback this afternoon after starting the day in line with the highest levels of the week. As underlying market conditions improved in the afternoon, several lenders released new rate sheets, but it wasn't enough to bring rates lower than yesterday's or last week's. Even then, many borrowers will still be quoted the same rate today, but with higher closing costs (those costs equate to a 0.03% rise in rate). The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains 4.25%.
The theme for this past week turns out to have been the culmination of a short term trend higher in rates, beginning in late May. The most aggressive days of that move were in the previous week, but Monday and Tuesday of this week kept the pressure on. This raised the possibility that the uptrend would continue, but the slowing pace provided hope for a correction.
As of yesterday, we finally got the drop in rates needed to interrupt that trend. This also opened the door for a deeper correction if rates could have improved today. But because we instead saw the move slightly higher and sideways, the best characterization for rates at the moment is that the recent move higher has run its course, but no new trend has been decided on yet. That's a less optimistic scenario for those who'd like to float in the hopes of further improvement, but still a less urgent scenario than earlier in the week for those inclined to lock.
Loan Originator Perspective
"We saw slight losses today in rate markets. It would have been nice to follow through on yesterday's gains, but looks like bond traders prefer 10 year yields in the area of 2.6% for now. Next week brings inflation data on Tuesday. Iraq is the wild card, should missiles start flying, rates could benefit. Looks like locking for loans within 30 days of closing is likely the way to go until we see another downward rate trend." - Ted Rood, Senior Mortgage Planner, tedroodteam.com
"The benchmark 10 Yr Treasury is sitting right where it began this past Monday although mortgage pricing is actually just a tad worse on the week. I don't see anything out there to tell us that the odds are in our favor that mortgage pricing will improve soon. Certainly it can, but prudent minds with a closing date in the near term should seriously consider locking in current pricing. For the risk takers among us with a little longer to go to closing feel free to place your bets. Stay in touch with your mortgage professional and be ready to pull the trigger." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"It sure would have been nice to see another strong up day in bonds to confirm the potential trend reversal. We did however test support and once again it held which can be seen as positive. With the uncertainly of the situation in Iraq looming over the weekend and the market some what shrugging off the most of the potential issues there, I feel the risk vs reward for floating over the weekend is pretty low. " -Manny Gomes, Branch Manager, Norcom Mortgage
"News from the central bank of the UK sent our bond yields higher this morning. Despite the move, the upper end of the range has held and throughout the day yields have steadily moved back lower. With the range holding, and lenders being conservative on passing along the improvements today, I am still recommending my clients to float over the weekend." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.25%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 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%.
- The bias had been very slightly toward higher rates, it reversed course in early April as expectations grew concerning European Central Bank easing. On several occasions, those expectations would go on to overwhelm domestic economic data--normally the main source of guidance for market movements.
- 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. They remained in that range through month-end and grew more volatile ahead of the June 5th European Central Bank Announcement.
- 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).