September 24, 2014
Mortgage rates moved higher today, ending a winning streak that began last Friday. That positivity provided a much-needed push back against the pervasive weakness during the entire month of September up to that point. Today's weakness could prove to be brief correction or this could be an early warning sign that rates will have trouble making it back to previous levels.
The previous level in question is the 4.125% rate for conforming 30yr fixed loans. Top tier borrowers were seeing that quote more than any other up until September 12th, when it moved up to 4.25%. With yesterday's strength, rates came very close to moving back down to 4.125%, so today's weakness is effectively a rejection of that move. Again, it could be a temporary rejection, but we probably won't know until tomorrow afternoon.
Loan Originator Perspective
"Until we see a confirming break lower locking, is the best option. Today's slight price worsening could be a short breather on the move lower or a sign of higher rates to come, but either way we're right on the edge and locking is smart." -Brent Borcherding, www.brentborcherding.com
"It appears our streak of positive days will end today; but lender pricing is improved from yesterday. We have our final auction of the week tomorrow, month end and quarter end fast approaching all of which can be very supportive for low rates. With today's weakness and the better pricing, i think it would be wise to take short term floaters off the float boat. Longer term closing should continue to float to see if month end sparks a continued rally." -Victor Burek, Open Mortgage
"We lost ground today after three days of rate improvements. The move wasn't huge, and may have been prompted by a poor 5 year treasury auction and stock gains, but could also indicate a longer term sentiment shift. MBS Live issued a "reprice for the worse" warning mid day, and several lenders later issued new rate sheets. Floating borrowers may want to check pricing with their LOs to see if it's time to pull the trigger. " -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"The decision to float or lock is a bit tricky today. If you are a risk taker you may benefit from floating for it is still possible for rates to improve. If you are nearing your closing date and do not want to take any chances locking is a very smart move. If you choose to float keep a close eye on the market and have your loan officer on speed dial." -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).