September 23, 2014
Mortgage rates were lower for a 3rd straight day, effectively confirming that markets hadn't merely paused for reflection on a determined move to new 2014 highs. For a few days, that was a risk to be weighed as markets perceived last week's Fed Announcement as a turning point toward a more aggressive rate hike policy. The Fed Funds Rate doesn't dictate mortgage rates directly, but an accelerated rate hike outlook could create a change in momentum for the entire bond market, which includes the bonds that DO dictate mortgage rates.
Today's improvement brings rates back to levels not seen for 2 weeks. For some lenders this means that an actual drop in the quoted rate as opposed to a drop in closing costs. On average, the most prevalently-quoted conforming 30yr fixed rate remains 4.25%, but we're now much closer to 4.125%. Some lenders are there already. Keep in mind though, even in cases where lenders CAN offer that rate, 4.25% may be a better deal in terms of closing costs vs monthly payment.
Loan Originator Perspective
"Floating continues to pay off, but unfortunately we haven't broken into territory that confirms the downward trend will continue. In fact, we're right on the edge of the line that will determine whether a move lower will continue or that our next move is upward. Like risk, then float, but if you've floated the last 2 days now is a good time to take games and avoid the risk of a move higher." -Brent Borcherding, www.brentborcherding.com
"Looks like we are gonna end with another green day today, 4 in a row! Lenders continue to be slow with passing along the improvements. With the 10 year treasury breaking below 2.55, i favor floating all loans overnight." -Victor Burek, Open Mortgage
"Looks like an instant replay of yesterday as we continue our steady but subdued rate improvements today. No defining catalyst, which is actually a good thing in my eyes. I'm going to stay with a floating bias for the moment provided a) you have some time to closing; b) you have some risk tolerance,; c) most importantly, you have a responsive and informed loan officer to update you on market moves as they happen!" -Ted Rood, Senior Mortgage Planner, tedroodteam.com
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).