June 19, 2014
Mortgage rates moved very slightly lower today depending on the lender. Some lenders had passed along fairly aggressive improvements with mid-day reprices yesterday. In those cases, improvements were more limited today and some of them ended today at slightly higher rates.
Other lenders who didn't improve significantly yesterday after the FOMC events, instead did so this morning. In all cases, lenders were very likely to raise rates during the day as bond markets weakened substantially after a stronger start. When bond markets weaken, prices fall and rates rise.
The net effect is that this afternoon's rates are just barely lower than yesterday afternoon's average rates (today is higher than lenders that got aggressive yesterday, but lower than lenders who didn't). The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains 4.25%. Many borrowers will see today's drop only in the form of lower closing costs (equivalent to 0.01% in terms of rate). Some lenders are getting close to 4.125% again.
Loan Originator Perspective
"Mortgage pricing is still bouncing back and forth within a narrow range which means a do nothing float strategy right now appears safe if you're closing is out farther on the horizon (greater than 30 days perhaps). In the short term, it's easy to get caught on the wrong side of the range if your in a position where you are forced to lock so caution is warranted for short timers. If you like what you have now and your closing is soon, no sense in waiting." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"The extreme volatility sure does make it difficult to choose between floating an locking lately for what appears to be a safe bet one day becomes the opposite the next. In markets like this it always smart to play the range and lock when you are at the bottom end of the rate range like we were this morning before many lenders repriced. We have been in this range for quite awhile now, and history tells us when the range is prolonged when the eventual break from the range occurs the move is swift and extreme. It sure would be nice to see that move to be towards lower rates but if the opposite occurs you need to be protected and locked. " -Manny Gomes, Branch Manager, Norcom Mortgage
"We had a nice run in MBS from mid day yesterday through morning rate sheets this morning. I took advantage of this and locked a handful of loans this morning. Now that the improvements have been somewhat erased, I would cautiously float new applications. Day-to-day movement remains minimal, so the stakes are only high if we move out of the recent range." -Steve Chizmadia, Mortgage Advisor, American Capital Home Loans
"Rates were better this morning, but slid higher in the afternoon. Net/net, not much damage so far this week and not much movement overall. Those happy with their current pricing may want to lock. If you float, do so knowing there's a risk your pricing will worsen, and make sure your loan officer is following MBS Live." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"This morning was a great opportunity to lock in short term closings as lenders passed along their best rate sheets in the last couple weeks. The improved pricing didn't last long as rates came under pressure as the day progressed and all lenders have repriced for the worse. Rate are still holding in our recent range, and if you missed this mornings opportunity, I would float overnight and see if we can recoup the losses." -Victor Burek, Open Mortgage
"Day to day, I still think floating is a solid option that could pay dividends. Rates are still at the high end of the recent range and I think the greatest odds are for a move lower in the range. The range is the range, until it isn't. " -Brent Borcherding, www.brentborcherding.com
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).