July 25, 2014
Mortgage rates were sideways to marginally lower today. Many lenders released new and improved rate sheets in the afternoon in order for the average to get better than yesterday, but even then, lenders are obviously cautious ahead of next week's big-ticket events. The most prevalently-quoted conforming 30yr fixed rate remained at 4.25% for flawless scenarios, though 4.125% is still a contender--especially among lenders who released rate sheet improvements.
It's not uncommon for financial securities (like those that influence mortgage rates) to pull back and consolidate/correct after a winning streak. Yesterday's abrupt move higher threatened to stand as the beginning of just such correction heading into next week. As such, simply being sideways is a victory today! And again, the lenders that are issuing revised rate sheets this afternoon are moving into slightly better territory than yesterday.
From a strategy standpoint, today's improvement doesn't really change things. It continues to be the case that next week could send rates moving much higher or lower. At the very least, movement will be more volatile. The conclusion is that both risk and reward are elevated when it comes to floating a rate.
Loan Originator Perspective
"Today was a gift, in terms of improved rates. I fully expect we'll see rates tick slightly higher into Wednesday next week when ADP and GDP are reported....followed by the largest report of the month, NFP. Treasuries are near 6 month lows and the greatest risk and likelihood is for higher rates next week. I'd take the gains and lock today." -Brent Borcherding, www.brentborcherding.com
"Next week is action packed. We are almost assured to see some pretty big moves with interest rates. MBS opened today a little weaker than the prior day but that didn't last too long as they have rallied. Lenders will be very slow to pass along the improvements. As of 2pm eastern, no lender has repriced despite about a 10 tick improvement in MBS price. My advice to clients would be to only consider locking today if your lender reprices for the better. If not, I would float until Monday and re evaluate pricing." -Victor Burek, Open Mortgage
"Even though we caught a break today and pricing improved odds favor locking for short term closings to protect the rates and pricing we have now. Waiting until Monday probably won't hurt you much, and may help some more, but you never know. If you're comfortable with what's in front of you now then lock. Next week lines up as a big data dump week ending in the all important Jobs Report on Friday which could mean a pickup in volatility. Float with extreme caution." Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"With next week’s big events, I would float until the first sign of weakness. Rate markets will move next week, but which direction is the unknown. Geopolitical events have held rates down and could continue to do so. So far this year good economic reports haven’t moved rates higher as would normally be the case. It’s been a grind sideways to slightly better and hopefully the trend continues" -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
Today's Best-Execution Rates
- 30YR FIXED - 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).