July 16, 2014
Mortgage rates were just barely higher today on average. The movement was so small that several lenders were actually unchanged or slightly better. This is consistent with an ongoing trend of incredibly small day-to-day changes in rates. The range has been narrow enough to keep the most prevalently quoted top-tier rate between 4.125% and 4.25% for conforming, 30yr fixed loans. The market is currently fairly well split between the two depending on the lender and scenario.
Economic data is historically one of the most important considerations for interest rates. Stronger data tends to push rates higher and vice versa. Although the impact is diminished in the current era of narrow ranges, the connection is still observable on most occasions.
Today, for instance, weaker manufacturing data gave a boost to the bonds that underlie mortgage rates early in the day. Later in the morning, stronger homebuilder sentiment pushed back in the other direction. The impacts were almost too faint to be detected in both cases. Tomorrow brings a more robust line-up of economic data. This could do more to cause movement in rates.
Loan Originator Perspective
"Continued relative calmness in the mortgage markets this week lends itself to complacency. However, calm in the mortgage markets is often followed quickly with volatility so borrowers on a short time frame to closing (within 15 days) should seriously consider locking. For the time being, longer closing periods may lend themselves to a wait and see position looking for the improved pricing one gets with a shorter lock period. Still, be closely connected to your loan officer and ready to make a quick lock decision as things can change for the worse rather quickly." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"If you're looking to lock in the next day or two, I still favor locking at this time. There's still more risk to the upside than likelihood of a move lower, without much data on the horizon. Next week has more significant data that could move the market, then what remains in the next two days of this one." -Brent Borcherding, www.brentborcherding.com
"It appears 2.57 is still holding strong as support as yields hit this level earlier today and bounced off just like it had done yesterday. We do get some pretty significant data in the morning which could move the markets in either direction. With lender pricing the same today as yesterday, I think cautiously floating over night is the way to go, as long as you can tolerate the risk." -Victor Burek, Open Mortgage
"Right now, I favor locking at application to avoid any chance of rates spiking higher. Renegotiation options exist so why take a chance on higher rates causing a headache." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
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).