July 11, 2014
Mortgage rates moved just barely lower today, bringing them in lines with the lowest levels of the month. In this case, when we talk about "the lowest levels of the month," it means that closing costs are as low as they've been for the same rates that have been available for the past several days.
In other words, 4.125% is still the most prevalently quoted conforming 30yr fixed rate for top tier borrowers, but the closing costs associated with that rate are just a bit lower today vs yesterday. 4.25% remains fairly prevalent as well, depending on the lender and scenario.
With today's gains, rates have strung together a full week without moving higher at all. Those are the sorts of streaks that only last for so long before turning around, even if only temporarily. In other words, 5 days is long winning streak when it comes to rates. Each successive day makes it exponentially more likely to take a breather. Combine that with the fact that 4.125% is on the lower end of the 2014 rate range and those inclined to lock are perfectly justified.
Risk-takers holding out for further gains also have some room for weakness as rates aren't likely to break above June/July highs without ample warning, and it's those highs that would be the most aggressive line in the sand at which floaters should lock to prevent further losses.
Loan Originator Perspective
"Not much change in lender pricing overnight. As today has progressed, MBS have managed to eek out some gains and a couple lenders have repriced for the better. I would encourage those within 15 days of closing to lock IF their lender reprices better today. If you do not get a reprice better or if you are closing in over 30 days, I would to the risk and float over the weekend. There are quite a few global issues which could very easily spark a flight to safety rally which would benefit rates." -Victor Burek, Open Mortgage
"Looks like floating has paid off however this may be coming to an end soon. I would take a good look at the market Monday as that may be the day to start locking loans closing within the next couple of weeks." -Chris Marconi Vice President First Midwest Bank
"Rates improved again today making it a pretty good day to lock especially if your lender issues improved pricing in the afternoon or if your closing is a few weeks out. I'm keeping my eyes on the ten year treasury yield. If we break below 2.50% there is a chance rates could continue to improve. We do need to be cautious for the past few times we dipped below 2.50% the yield bounced higher." -Manny Gomes, Branch Manager, Norcom Mortgage
"Even though we end the week with better pricing than when we began, we've hit a floor again here where the lack of follow through to better pricing worries me a little. I would strongly consider locking in this pricing if your closing is within the next 15 days. For longer term closings it might pay off to wait and see if we get any follow through to better pricing next week but any sort of reversal to worse pricing would make we shift to a locking bias." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
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 hallmark of 2014 so far has been a disconcertingly narrow range in rates. Too many market participants bet on rates going higher in 2014, and markets have punished that imbalance with a paradoxical move lower.
- As of June, rates were officially lower year-over-year, but that's due to rates' path higher in 2013. The current path in 2014 remains sideways.
- European markets continue to play a nagging role in the background, generally helping rates in the US remain lower than they otherwise might be.
- From a wider point of view, we're in limbo, waiting for the first significant move away from the narrow range. A rally into late May stood a chance to act as this break, but rates have since returned to what were previously the lower limits of the 2014 range.
- As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.' Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy. It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).