September 19, 2014
Mortgage rates moved slightly lower today after hitting the highest levels in more than 4 months yesterday. There were no significant economic events providing guidance today. This actually makes the strength more meaningful as the absence of big-ticket events left bond markets to their own devices. In that sense, the rally was more of a conscious choice.
Rate quotes fell back in line with those seen on Monday. Most borrowers will see the changes in the form of closing costs as the move wasn't big enough to affect rates themselves. 4.25% remains to most prevalently quoted conforming 30yr fixed rate for top tier scenarios.
This week ends on a bittersweet note. On one hand, Friday's loan costs improved at the best pace of the entire month. On the other hand, not only was it a small improvement by historical standards, it also leaves us in line with recent highs. The bigger question is whether this is a turning point that marks the end of an abrupt September market movement, or merely the eye of the storm. We've seen some events in markets over the past two days that allow for a bit of cautious optimism, but in the current environment, it's important to reevaluate that optimism every day. Anyone who holds off on locking a rate should have a limit set overhead as to how much rates would have to rise before they'd cut their losses and lock.
Loan Originator Perspective
"After a rough couple weeks, looks like rates might close out today with 2 days of positive progress in a row. Many lenders have repriced for the better today, passing along some of the gains. My recommendation would be to continue to float to see if this move can gain some more momentum next week. Plus, its Friday, and i am not a fan of locking on Fridays." -Victor Burek, Open 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).