July 14, 2014
Mortgage rates rose modestly today, ending last week's streak of 5 days without an increase. The movement wasn't enough to unseat 4.125% as the most prevalently-quoted conforming 30yr fixed rate for top tier scenarios. That means today's changes came in the form of increased closing costs for the same rates as Friday. Expressed in terms of rates, the hike is equivalent to 0.03%.
As we discussed on Friday, the sorts of winning streaks seen last week become progressively less likely to continue after the 5-day mark, even if the pull-back is only temporary. Whether or not today's pull-back proves to be temporary will likely have something to do with tomorrow's significant events. Earlier in the morning, the Retail Sales report could cause some movement in the bond markets that most directly affect mortgage rates.
The main event will be Fed Chair Yellen's first day of congressional testimony. If markets are still feeling negative about rates after that, it would go a long way toward establishing a short term trend toward higher rates. Above all else, it bears repeating that the recent range has been exceptionally narrow, with over 2 months spent at either 4.125% or 4.25%. Until that's no longer the case, risk and reward for locking or floating is low enough that a case can be made for either.
Loan Originator Perspective
"Rates took a step upward today, continuing to bounce within recent ranges. The hope is that we'll trend back down as we have been, but the pattern won't last forever. As the Fed draws closer to raising its Fed Funds rate, it's likely that 10 year bond yields will eventually rise, and mortgage rates with it. The biggest question isn't if, but when at this point. Until the pattern breaks, looks like the play is lock on rate dips for buyers with some risk tolerance. " -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"For borrowers with a shorter time frame to closing (15 days or less) this failure of follow through to additional pricing improvement means I would recommend locking in and protecting current pricing. For those with longer time frames, however, we continue to meander within a range that until broken lends itself to more of a wait and see position. Stay connected closely to your mortgage professional, however, as the market can move quickly and you need to be ready to act." -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).