June 27, 2014
Mortgage rates moved lower again, with the best options available in the morning hours. After that, bond markets including MBS (the mortgage-backed-securities that most directly affect mortgage rates) moved back into weaker territory on the day, prompting some lenders to raise rates in the afternoon. The most prevalently quoted conforming 30yr fixed rate for best-case scenarios (best-execution) remains at 4.125%, with most borrowers seeing today's improvement in the form of lower closing costs. Expressed in terms of 'effective rate,' the drop in closing costs amounts to 0.02%.
Even after the afternoon reprices, today's rates are still the best this month and very close to being the best this year. Only 2-3 days were better at the end of May. Any time rates are at a periodic low like this, it's never a bad decision to lock in the improvements. While we could see modest gains from here, the risk is rapidly increasing that the recent trend of improvement will take a breather, or even reverse next week. If you're not able to lock today, or not interested, just be aware that the prospects for volatility will be increasing after Monday night.
Loan Originator Perspective
"Despite today's late day losses, which resulted in a couple lenders repricing worse, I feel floating over the weekend is worth the risk. The 10 year is holding well under resistance at 2.57. If you are risk adverse, and your lender hasn't repriced better and you are within 15 days of funding, then locking is the safest play." -Victor Burek, Open Mortgage
"As we head into a holiday shortened week ending with a day early Jobs Report on Thursday it's important that you stay very much engaged with your loan officer on market movements. If you've experienced improvement in your pricing this week, and you're closing soon, I think it just makes sense to get what you have protected. Floating for a couple of more days may be okay but risk increases with every day next week and I'm always inclined to be protected (locked) going in to a Jobs Report." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"After three days of improved pricing we opened to further gains this morning. They vanished by mid day and some lenders repriced worse. The question is whether we've merely hit the bottom of our current range (which would mean it's time to lock), or today was just a pause before our rally continues next week (which would mean float). No crystal ball here, but if I were a borrower happy with the best pricing in nearly two months, think I'd be locking." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"I think floating into Monday is a reasonable option, but I would absolutely be in contact with my loan officer as day to day, can go either way right now. I think the trend over the next week will be a slow move slightly lower, but day to day is always a gamble when you're in the middle of the range." -Brent Borcherding, www.brentborcherding.com
Today's Best-Execution Rates
- 30YR FIXED - 4.125
- 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).