June 24, 2014
Mortgage rates were slightly lower today, but did not move much from yesterday's latest levels. Some lenders are even in slightly higher territory. Underlying market movement was volatile, but only in the context of a fairly narrow range. Geopolitical concerns, stock market weakness, and trading considerations relating to today's Treasury auction helped bond markets improve at their fastest pace of the day in the afternoon, prompting some lenders to reprice to slightly lower rates.
Mortgage rates exist primarily in .125% increments, and recent improvements brought average rates close to the next .125% lower rung on the ladder. So although today's improvement is quite small (it equates to roughly 0.01% in terms of effective rate), it is pushing the most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) closer to 4.125% from the recent 4.25% level. Both rates are common for the moment though 4.25% remains more so.
In general, the overall range of rates has been exceptionally narrow for longer than such narrow periods tend to last. It's anyone's guess as to the event(s) that will prompt a break from that range, but given the length of time it's endured combined with the upcoming calendar, it's possible by the end of this week and probable by the end of next week.
Loan Originator Perspective
"Rates continue to be range bound, waiting it seems on something to move one way or the other. I continue to think the best strategy is to float until you are within 15 days of funding. Locking on a 15 day lock gets you the best pricing. If locking today, you should wait until end of day to allow lenders time to pass along some of the gains. If your lender doesn't reprice better, I would float over night but be ready to lock early." -Victor Burek, Open Mortgage
"Economic data appeared to "heat up" a bit more today with market volatility perking up and pricing improving a little bit. But, appearances can sometimes be misleading. Nothing has really changed in a signicant way and we remain rangebound with little movement overall. Tomorrow gives us another chance at a more significant move with Final 1st Quarter GDP numbers but a bad quarter is pretty much already baked in. Simple locking advice is to go by your risk tolerance until a more decisive market direction can be ascertained." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"Bonds were able to mount a rally after a just OK Treasury auction. The rally was not enough to break pricing out of the current range. Lets see what tomorrows auction brings. Until then the risk/reward for floating remains low." -Manny Gomes, Branch Manager, Norcom Mortgage
"Floating still remains a relative safe risk to take at this time. There does not appear to be any real bias toward higher rates at this time, and as we remain near the top of the range, the opportunity for a move lower still exists. I've said this, nearly exact thing, several days in a row now, but it's because the sentiment holds true. Always be prepared to lock but floating remains a good risk for the time being." -Brent Borcherding, www.brentborcherding.com
"Rate markets improved this afternoon, but remained in our narrow recent range. Stability is nice while it lasts (float when we're near top of range, lock when near the bottom), but it's vital to be vigilant. For now, we'll take it!" -Ted Rood, Senior Mortgage Planner, tedroodteam.com
Today's Best-Execution Rates
- 30YR FIXED - 4.125-4.25%
- 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).