August 18, 2014
After hitting the lowest levels in over 2 months on Friday, mortgage rates bounced almost all the way back to Thursday's levels. That's somewhat significant as the drop between Thursday and Friday was one of the strongest moves lower in months.
The original impetus for Friday's strength had been headlines suggesting the armed conflict in Ukraine was taking a turn for the worse. When markets arrived this morning to see that didn't turn out to be the case, some of the "panic premium" began evaporating. As the day progressed, there was a stark absence of disconcerting headlines, and it's those negative headlines that fuel investor demand for the types of safe-haven securities that benefit mortgage rates.
The most prevalently-quoted conforming 30yr fixed rate for top tier scenarios remains 4.125%. Many scenarios are still at 4.25% depending on the lender. The prospects for widespread availability of 4.0% die down with today's move, but apart from yesterday, we're still as close to that as we've been since late May.
If you have the stomach to absorb further increases in rates, floating isn't out of the question as we're still near the lower side of a longer-term trend leading lower. Just realize that if rates continue high enough to break that trend, you could be forced to lock at a loss. For shorter term scenarios or longer term scenarios that are happy with current rates, it's also a good idea to lock near long-term lows if the opportunity presents itself, and today's rates are still among the best of the year.
Loan Originator Perspective
"Mortgage bonds traded down today as the equity market rallied. We were at the top end of the range for mortgage bonds so pull back is somewhat expected. How long the pull back will last is the million dollar question. To protect yourself especially if you are closing in the coming week or two locking today makes a lot of sense. " -Manny Gomes, Branch Manager, Norcom Mortgage
"Rates appear to be at least taking a breather before we see them move any lower, but they are taking that break at a "dangerous" location. I believe it's worth floating over night, but being ready to lock should we break back above the long term support. The longer we can stay at these levels or below, the better, but it's going to be day to day for a few more.." -Brent Borcherding, brentborcherding.com
Today's Best-Execution Rates
- 30YR FIXED - 4.125
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25%
- 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).