June 20, 2014
Mortgage rates moved modestly lower again today. While that leaves them a bit higher than the best rates of this year, it enables an important year-over-year milestone. On June 20th 2013, bond markets were convulsing and rates were in the midst of what we called "The worst 2-day move in 4 years." That move brought the average closing-cost adjusted rate up to 4.29%. Today's average is 4.18%. So for the first time in over a year, and as Calculated Risk suggested would happen soon, mortgage rates are officially lower year-over-year.
While this is primarily a factor of the timing of 2013's rapid increases, it's nonetheless a welcome development on some level. Given all the turmoil that was yet to come on June 20th last year, it's reassuring that markets were able to take a logical step back from the brink of insanity (where 'insanity' = rates so high that no one is interested in real estate outside cash buyers).
Today's rates didn't have to move in order to hit the 1-yr milestone, and indeed they moved very little. Some lenders were actually in worse shape today, but closing costs were just slightly lower on average (0.02% in terms of effective interest rate). The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains 4.25%, but 4.125% is becoming viable once again.
Loan Originator Perspective
"As we continue to bounce around in a tight uneventful range for mortgage pricing it's important that we not get complacent. The importance of economic data releases starts to heat up as we head in to next week culminating with the all important Jobs Report in just 2 weeks time. If your closing is within the next 2 weeks and your happy with what you can lock in for today than what's the point in waiting. Beyond 2 weeks is simply gut check time to assess your risk tolerance and don't stray too far from the ears and eyes of your loan officer." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"I sound like a broken record by now but we are still in a very tight rate range. One bright side is the 10 year treasury has now moved up to 2.66 intra-day for the third day in a row and the yield has been able to move lower during the session. This 2.66% level has been acting as a ceiling of resistance and placing a lid on the yield which can make floating low risk should the yield not cross that level." -Manny Gomes, Branch Manager, Norcom Mortgage
"Rates taking one step backward, one step forward, and we improved today. Still very much within recent ranges, but nice to be trending lower. It can be hard not to get complacent when rates stay stable, but floating borrowers need to still be watchful. It's also important to make sure your loan officer knows your risk tolerance should pricing worsen. Communication is the key!" -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"Lender pricing was slightly better this morning and by mid afternoon, most have repriced improving pricing more compared with the last rate sheets of yesterday. With no major data coming Monday other than existing home sales which will probably disappoint, I think continuing to float is the way to go. There is still a lot of geopolitical risk that will likely not be solved this weekend which at any time could spark a major rally in our favor. If you do not want to accept the risk of floating, wait until later in the day to lock, to allow your lender time to pass along today's gains." -Victor Burek, Open Mortgage
"Floating still remains a relatively low risk option with potential reward. As when continue to hover at the high end of the range, the most logical direction is towards lower rates, at this point. FLOAT" -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.
- The narrow range persists even now, though due to the rate landscape from a year ago, rates were officially lower "year-over-year" on June 20th.
- (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).