July 31, 2014
Mortgage rates started the day in fairly rough shape with most lenders offering noticeably higher rates vs yesterday. As stock markets slid into the afternoon, the bond markets that underlie mortgage rates improved. Most lenders put out better rate sheets at some point in the day. In most cases this brought them fairly close to yesterday's latest levels though rates were just slightly higher on average. The most prevalently-quoted conforming 30yr fixed rate for flawless scenarios remains 4.25%.
Tomorrow brings what is traditionally the most important economic report of any given month. The Employment Situation Report is expected to show the economy adding 233k jobs in July with the unemployment rate holding steady at 6.1 percent. Of those two figures, markets focus almost exclusively on job creation (expressed in "nonfarm payrolls"). If payrolls are significantly higher than 233k tomorrow, rates will likely move higher as well. There is absolutely no way to know how it will come in ahead of time, but considering what's at stake, risk outweighs reward when it comes to floating (assuming you have the chance to lock tonight).
Loan Originator Perspective
"Locking is still the easiest and safest option, almost always is actually. However, I think the sell off over the last 2 days takes a little of the risk off in floating. Sure, if NFP beats by a gigantic margin....all bets are off, but a number at or near the forecast of 233k isn't likely to lead to a lot more damage. Of course, a number of 200K or below is very likely to lead to improvement. Only float if you can tolerate the risk, and if you do, be ready to lock first thing in the morning." -Brent Borcherding, www.brentborcherding.com
"The bleeding from yesterday's strong 2nd Q GDP Report seems to have relented but the always critical and potentially market moving Jobs Report lies in front of us in the morning. If you are closing within 15 days, locking it up today and taking away the risk of another sell off in the mortgage market just makes sense. If you are still a ways off to closing you simply have to assess your risk tolerance as a really strong report tomorrow could send us in to sell off mode again but a weak or benign report could keep us stable and a floating stance more palatable." -Hugh W. Page, Mortgage Banking Office, Seacoast National Bank
"Our busy week wraps up tomorrow with the release of the Employment Situation Report. In my opinion, I think a pretty good report is baked in already, so I favor floating especially if you have more than a couple weeks until close. As always, if you are happy with the rate and fee structure of current offer, locking is the safe move. Only those that can afford the risk of a higher rate or fee structure should consider floating. " -Victor Burek, Open Mortgage
"We were lucky to see the market recover the morning losses today, and albeit we saw a few generous reprices we still end the day on rates near yesterdays close. I think tomorrows NFP report is too relevant to speculate a large miss, or rather large enough to get us back to substantially better levels. The risk involved if NFP is a strong number is too large to speculate floating into tomorrow. The only saving grace in the recent sell-off is we are still in the range of 2.44-2.66. 15 days- 100% locked, 30 days- 80% locked, 45 days- 100% floating." -Constantine Floropoulos, Quontic Bank
"I’d still recommend locking your rate before tomorrow’s jobs report. If the numbers beat estimates, then rates will take another hit. If that’s not the case, I believe improvements will still be minimal at best. Bond markets are still shaking off the stun of the GDP numbers from yesterday. At the moment, stock markets don’t like the numbers either, which may be helping bonds avoid a steeper decline. " -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).