September 18, 2014
Mortgage rates only moved slightly higher today for most lenders. Some lenders were unchanged from yesterday, but on average, rates inched up to match their highest levels since May 1st. There was no significant underlying market movement, which is interesting considering yesterday's Fed Announcement was expected to do more to stir up the action. Instead, the mortgage-backed-securities (MBS) that underlie mortgage rates simply held flat today after losing only a moderate amount of ground yesterday.
While we technically moved from "1.5 month highs" to "4.5 month highs," it's important to note the two were separated by a mere 0.01% in terms of effective interest rate. The actual rate quotes going out today would be the same as yesterday in most cases, but with marginally higher closing costs. 4.25% remains the most prevalent conforming 30yr fixed rate for top tier borrowers.
Loan Originator Perspective
"I'm starting to feel a tad more comfortable at these levels, due to a lack of a continued move higher today. I would float cautiously and be ready to lock with my broker at the first opportunity. The 10 yr treasury yield's high as been 2.63 as I type this, and since May we've hit this level (2.64-2.65) 5 times before heading lower. We're watching for a bounce lower, and that's why I'd look to float. However, a move higher is likely to be an aggressive on, so again, float cautiously and be ready to lock." -Brent Borcherding, brentborcherding.com
"Rates today are basically unchanged from yesterdays reprices for the worse. Rates market seems uninspired to move in any direction right now. If you can tolerate the risk, i would continue to float. We continue to have several geopolitical concerns around the globe that could spark a rally in rates at any time." -Victor Burek, Open Mortgage
"Seems to me that all eyes are now focusing less on when the Fed will raise rates but how quickly and how much. So, the bias is clearly to higher rates down the road. Certainly we'll have volatility up and down between now and when rates do begin to rise but in the absence of data strongly to the contrary I would be anticipating this increase. So, I recommend locking up short term closings and being very careful with any longer term locks staying in close touch with your loan officer."-Hugh W. Page, Mortgage Banker, Seacoast National Bank
"Rates stayed near yesterday's post-Fed levels today, while still well higher than the last several weeks'. The big question now is where we go from here, and it's too early to know that. It will take some poor economic data or international drama motivation to tilt rates back down. Until then, hard to get excited about floating with rates above their prior range. Remember, f you lock and rates plummet, most lenders have renegotiation policies." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"Mortgage bonds are at a pivotal point. Should they fall a bit more it could bring a round of selling which will bring with it higher mortgage rates. However if they are able to reverse course and head higher we could see home loan rates drop from current levels or at least make locking in a good rate less costly. Risk vs reward leads me to recommend a floating stance heading into tomorrow." -Manny Gomes, Branch Manager, Norcom Mortgage
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).