July 8, 2014
Mortgage rates improved today. The bonds that most directly affect rates got a boost from stock market weakness and ongoing European bond market strength. Today's drop in rates is significant in that it preserves a range that's been intact since early May.
The range in question is small in terms of rates--stretching only from 4.125% to 4.25%. Most of the day-to-day movement takes place in the form of closing costs (because lenders tend to offer rates in .125% increments). So today's most prevalent rate quotes are the same as yesterday's (4.25%), but with slightly lower closing costs. This drop in closing costs equates to 0.03% in terms of effective rate.
As has so frequently been the case in 2014, any time we're inside a narrow range, borrowers who are inclined to float have more justification in doing so, provided they're ready to lock if rates move back to the higher end of the range. On a cautionary note, while rates have adhered to this range for 2 months now, the visits to the lowest levels have been progressively higher. This could indicate that the longer-term momentum is pointing very slightly higher, and we'd need to see a move below late June lows to rule that out.
Loan Originator Perspective
"We are firmly at 4.25% but I still think floating in the short term may be worth it. Just make sure your Lender can lock quickly if it starts to move upward." -Chris Marconi Vice President First Midwest Bank
"With stocks weaker for a second day in a row mortgage rates improved again amidst a quiet week in most respects as far as economic data releases are considered. Recent moves have not taken us out of the persistent range we've been in which tends to support a locking bias for those with short term time horizons. For those with longer time frames, a floating stance with a keen eye to the markets and your loan officer on speed dial may be in order." -Hugh W. Page, Sen. Mortgage Consultant, Capital Partners Mortgage
"I have favored floating since last Wednesday for everyone that missed locking before the payrolls data. If you followed that advice, todays pricing is the best we have seen since Tuesday. Weak data out of Europe and continued issues around the world(Ukraine, Iraq and now Israel) have all contributed to the improvements we saw today. If your lender reprices for the better today, and you are within 15 days of funding, you should consider locking. I think everyone else should continue to float if you can tolerate the risk." -Victor Burek, Open Mortgage
"Nice gains today, as rates continued to return to July 1st's lower levels.. There may be further room for improvement in store, as treasuries have outgained MBS the last few days. As of mid day, 4 lenders repriced better, with more likely on the way. Short term, floating looks like the play. Longer term trends still TBD, stay tuned." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"The range appears to have found its support at the high end and floating the last 2 days, has paid small dividends. Tomorrow there is the 10 yr Treasury Auction and a good auction could lead to further gains. A good auction is no guarantee, but I think rates being near their highs for the last month should make it attractive. Floating continues to be a good option." -Brent Borcherding, www.brentborcherding.com
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).