July 29, 2014
Mortgage rates were slightly lower today, holding inside a low and narrow range that's been intact for nearly 2 weeks. The movement was small enough that some lenders are unchanged compared to yesterday, but they're the exception. The most prevalently-quoted conforming 30yr fixed rate for flawless scenarios is still a bit of a toss-up between 4.25% and 4.125%. Today's improvement tips the scales toward 50/50 whereas 4.125% was less prevalent yesterday.
For about the same amount of time that rates have been low and stable, we've been anticipating the next 3 days in financial markets. In short, there is an impressive confluence of data and events that stands as good of a chance to break the monotony as anything. Rates could either bounce back up toward the previous 2014 range, or they could improve to levels not seen since early 2013. And of course, there's always a chance that markets don't deliver on either potential move.
We won't be able to fully observe the extent of this week's potential until Friday after the big jobs report in the morning. But tomorrow has some heavy duty events. Perhaps the biggest wild-card is the first reading on GDP for the 2nd quarter. The 1st quarter reading underwent a rather appalling slide into negative territory, but may have been distorted by temporary factors. This makes predicting the 2nd quarter results more of a guessing game for market participants. The wider the range of expectations for any important economic event, the bigger the potential reaction. And that's just in the morning!
The afternoon brings a very important event in the form of a Fed policy announcement. While the Fed isn't expected to make any significant changes, markets are on high alert for subtle changes that hint at the pace of change with respect to the current accommodative policies.
Loan Originator Perspective
"The next few days are assured to be volatile with the amount of data on tap. My suggestion is to lock, and avoid the swings. Simple as that." -Brent Borcherding, www.brentborcherding.com
"I think the consensus of loan officers will be to lock today as floating into tomorrow is extremely risky. Not only do we have a FOMC announcement, we also have ADP jobs report and GDP. Unless the FOMC surprises us, the GDP report is going to be the market mover. Economists expect a reading around 3.0. Float at your own peril and if GDP disappoints you will be rewarded, but I don't think the reward will be worth the risk." -Victor Burek, Open Mortgage
"So, it seems pretty evident that until we get past the big data in front of us we're going to bounce around in a tight range until something pushes us one way or the other. This could happen starting tomorrow with the Fed decision and2nd Quarter GDP (first "guesstimate") and ending with the Jobs Report on Friday. If your closing is within 15 days and and you're happy with the rate you can get today then LOCK. Too much risk. Beyond 15 days it could be a roll of the dice so check your risk tolerance for guidance. " -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).