September 17, 2014
Mortgage rates moved higher at a moderate pace today after the Fed reiterated their intentions regarding the gradual tightening of monetary policy. That policy has been one of the key factors in historically low mortgage rates. While the Fed didn't make any surprising moves, they did confirm some market fears. Ultimately the market movement wasn't very big compared to what it might have been. As such, it was a pretty fair reflection of the Fed announcement.
The bigger question is what markets will do from here. Today's weakness brings rates to 1.5 month highs officially, but they might as well be in line with Monday or Tuesday's levels. Many lenders are right there today, and a few are even in slightly better shape. 4.25% remains the most prevalently-quoted conforming 30yr fixed rate for top tier borrowers, with today's weakness being seen in the form of higher closing costs.
Loan Originator Perspective
"Well, we've made it through FOMC and there is no definitive direction of which way rates are headed next. In my opinion, locking at these levels is the safest and smartest day to day move. Even if rates move lower over the coming weeks, I think we may test slightly higher rates before that move ensues. Lock and if there is huge improvements on the horizon, look to float down to lower rates with your mortgage broker." -Brent Borcherding, brentborcherding.com
"The FOMC statement has come and gone. The initial knee jerk reaction was worse for rates, but once the full statement had time to sink in rates have settled in at unchanged levels on the day. Due to the negative move following the release, some lenders did reprice for the worse. All in all, the FOMC statement and presser seemed more on the dovish side, then the hawkish side. However, the Feds forecast from growth, unemployment, etc... was more hawkish but the Fed seems to always over estimate on their projections. If you floated through this report, i would continue to float. " -Victor Burek, Open Mortgage
"Mortgage pricing worsened slightly after the Fed Meeting this afternoon but it was not clear to me that we learned anything of significance from this meeting that alters the playing field all that much. We know rates will go up eventually but don't really have any more clues to help us narrow down that time frame. I maintain my view that I've had for some time now and that is short term closings (15 days or less) should LOCK and anything beyond that I defer to the borrower's risk tolerance."-Hugh W. Page, Mortgage Banker, Seacoast National Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.25
- FHA/VA - 3.75-4.0%
- 15 YEAR FIXED - 3.375-3.5
- 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. While top tier rates moved up an eighth of a point in early September, to truly move out of the "narrow range," we'd need to see another .125% higher (best-execution at 4.375%)
- 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).