September 10, 2014
Mortgage rates continued moving higher at a fairly quick pace today. Some borrowers may now start to see rate quotes moving up an eighth of a point. This is significant because most of the recent movement in the rate market has only affected the closing cost side of the equation. This can be thought of as a fine-tuning adjustment whereas actual changes in rate are a bigger deal. For instance, closing costs change daily, and sometimes multiple times during the day.
The interest rate part of rate quotes generally hasn't changed since early June for most borrowers. That means 4.125% has been the most prevalently-quoted rate for top-tier borrowers during that time. During the weaker moments, 4.25% has occasionally been a close second, but today's weakness brings it to roughly equal footing with 4.125%. Any rise in rates tomorrow would tip the scales in its favor.
So obviously we need to know what rates are going to do tomorrow! Unfortunately, there's never any way to be sure. What we do know is that bond markets are currently anxious about next week's Fed announcement. That happens on Wednesday, so rates are operating at a disadvantage until then. Keep in mind though, that there are always multiple factors in play when it comes to market movement. There is also very likely a limit on how much rates will rise between now and next Wednesday. The takeaway is that we could see a day or two of recovery between now and then, but it's probably not worth the risk to try to time that correctly.
Loan Originator Perspective
"Lock, Lock, Lock....rates are on the rise and if you are locking at any time in the next 3 days, now is as good a time as any. I think we'll see rates move lower in the coming WEEKS, but the current short term trend is for higher rates." -Brent Borcherding, brentborcherding.com
"I would definitely advise locking your rate to avoid any further losses in available lender credits and to protect against higher rates in general. The Fed announcement next week could indicate whether a faster increase in rates is on the way, removing the assumption that rates could stay low for a considerable amount of time. If bond markets think rate hikes may come in to play sooner, that would likely be bad for rates in the near term." -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.125-4.25
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25%-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 are now lower year-over-year, but that's mostly due to rates' path higher in 2013. The current path in 2014 remains sideways, though it has recently approached (but not broken) the lows set in late May
- European markets continue to play a prominent role, 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. The most prevalent top tier rates haven't changed since mid May
- 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).