August 12, 2014
Mortgage rates were unchanged for the most part today. Of the lenders who had measurable changes from yesterday's latest offerings, slightly more of them moved higher in rate, but the general lack of movement can't be overemphasized. To reiterate yesterday's assessment, this is an uncommon occurrence following a move to recent lows fueled by geopolitical risk. In other words, when unexpected headlines cause rapid movements in financial markets, rates don't normally just freeze at the lows for days on end.
Not only have things been stagnant in the short term, but the past few months have been exceptionally flat as well. In fact, it's not unfair to say that after bottoming out in late May, mortgage rates haven't moved much at all. Only two rates have been contenders for top-tier conforming 30yr fixed scenarios during that time: 4.125 and 4.25%. Whichever rate you were quoted yesterday is almost certainly the same rate you'd be quoted today.
The only differences from one day to the next are the very slight changes in closing costs. This is a factor of mortgage lenders typically offering rates in .125% increments. There is seldom enough movement to move rates by an entire .125%. The costs associated with those rates are like 'fine-tuning' adjustments that allow lenders to keep pace with the always-moving bond markets that serve as the basis for rate sheet movement.
Loan Originator Perspective
"Even with treasuries dipping to YTD lows we have not seen a substantial enough move in rates to truly warrant any speculation in floating. Geopolitics and foreign economic circumstances are the catalyst and that story will lose it's luster quickly. Lock em up." -Constantine Floropoulos, Quontic Bank
"Sitting at the bottom of a long term range & with no data immediately in sight, if there is a move one way or the other in the next day or two it is MOST likely that rates will rise. Locking is the safest option day to day right now." -Brent Borcherding, brentborcherding.com
"Not much as far as U.S data to move markets this week, so we will move based on developments in Ukraine, Syria, Palestine and Iraq. So good news will move us higher while bad news will hold us here or move us lower in rate. We also have some important data coming from Europe later this week that could impact our yields. It does seem we have a new range on the 10 year note with 2.44 being the top but it isn't rock solid support. With lender pricing slightly better today, I think those consumers closing within 15 days should consider locking. I also think longer term closings might want to look at locking; however, it isn't uncommon for yields to rally once the auction cycle completes on Thursday." -Victor Burek, Open Mortgage
"Nothing's changed today. In my opinion the risk of rates moving higher still outweighs the potential to move significantly lower which still lends itself to locking in short term closings now. Beyond the short term, it's really a crapshoot so check your risk tolerance and keep your loan officer on speed dial." -Hugh W. Page, Mortgage Banking Officer, M.B.A.
"Today's action looked more significant than it might have been, with MBS pricing gyrating upward/downward several times. As of 1:30 Eastern, no lender reprices were reported on MBS Live. Ukrainian Drama still injecting some risk demand into the market (which helps drive rates lower), we'll see how that plays out. Bottom line, we're still within recent ranges, so if you're happy with pricing, could do worse than locking. If you don't mind some risk, potential for international turmoil could still help rates." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"What a flat day today for rates. Risks reward currently favors locking. If things remain flat you could float and at least buy some time and lock for a shorter window. Things could change should geopolitical events escalate. This type of news should lead to a lower rates." -Manny Gomes, Branch Manager, Norcom 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).