August 28, 2014
Mortgage rates fell modestly for an impressive sixth straight day today. Yet again, we're seeing little attention paid to the events in the US that NORMALLY influence interest rates. Case in point, stronger economic data typically pushes rates higher, and three out of three economic reports were stronger than expected today. The dark horse market consideration continues to be Europe. Specifically, expectations for further accommodation from the European Central Bank combined with real economic deterioration in the Eurozone are motivating record low rates in European bond markets and US markets are interconnected enough to get some of that benefit.
We talked about this in more detail on Tuesday: (Read More: How Long Will Low, Flat Mortgage Rates Last?).
The cumulative effect of the 6 days of improvement brings rates even closer to their lowest levels of the year. The most prevalently-quoted conforming 30yr fixed rate for top tier borrowers remains 4.125%, BUT we're about as close to 4.0% coming into play as we have been all year. It's worth noting that on the past 2 occasions that rates have entered this territory, they moved higher shortly thereafter. The third time could always be the charm, but if you have a short term time horizon, the risk of floating still outweighs the reward. Longer term time horizons have more room for personal preference as it will take a major change in markets before we could rule out further progress based on the Europe effect.
Loan Originator Perspective
"Further gains this morning for rates, and as of mid PM, we're retaining them. The loans I priced today were priced around .3% better (on cost, not rate) from yesterday. Russia appears intent on "annexing" chunks of Ukraine, next question is what the international response will be. I'm still going with a floating sentiment at the moment for borrowers with some risk tolerance. While I'm not banking on big gains before the Labor Day weekend, it appears EuroDrama (both Ukraine and fiscal) isn't going to be solved before next week!" -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"I'd strongly consider floating over night, but my expectation would not be to see drastic improvement, possibly no improvement at all. The reason is that this weekend is a 3 day weekend, and should there be cause for more improvement, we're not likely to see it until Tuesday of next week. So why float? I think we're starting to trend lower and if we're on solid ground again, tomorrow, than I'd float into next week." -Brent Borcherding, brentborcherding.com
"Not much to add from my guidance over the last week or so. Short term closings should consider locking on today's improved pricing. Those over 15 days from closing, I would continue to float. Geopolitical drama is building, and Europe is going down hill quick which could lead to more stimulus which would benefit rates here." -Victor Burek, Open Mortgage
"With a steady dose of improving mortgage pricing all week heading in to a 3 day holiday week, I would be inclined to exercise caution. For closing in the near term (within 15 days) protecting these gains just makes sense. Next week we get potential market moving news events coming from all over and while we could certainly make additional gains given the right mix of economic and geopolitical news coming out we seem ripe for a correction at any time. I would be careful here." -Hugh W. Page, Mortgage Banking Officer, Seacoast National Bank
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).