September 25, 2014
Mortgage rates fell back in line with recent lows after a disconcerting move higher yesterday. In general, rates are still in the process of battling back from their worst few weeks of the year. Weakness during the first half of September resulted in the most prevalent conforming 30yr fixed quote moving up to 4.25% for top tier borrowers. On Tuesday of this week, that rate was close to returning to 4.125% until yesterday derailed the positive momentum. And now today, lenders are back to their best rate sheet offerings in more than 2 weeks, making 4.125% nearly as common as 4.25% again.
The most important question regarding September's previous weakness was whether or not it was merely the beginning of a big ugly move toward significantly higher rates. This week has gone a long way toward ruling that out. At the very least, when rates pull back from recent highs like this, it creates some breathing room. Reason being: those inclined to float can set a line in the sand near those recent highs and plan on locking if rates move back up.
Loan Originator Perspective
"I'm cautiously optimistic that we are about to break back into the long term trend of lower rates, but remain right on the edge. The safest decision is to take the gains we've received over the last several days and lock. On the other hand, should you decide to float it could be big dividends, because if we move much lower it will likely start momentum toward a larger move. On my personal loan, I'd float (I like to gamble) but I definitely would lock at any hint of a move higher from here. " -Brent Borcherding, www.brentborcherding.com
"Bonds have managed to recover all of yesterday's losses and some today. We do get the final revision of GDP tomorrow which could move the markets if better than expected. However, with treasury supply out of the way and with month/quarter end fast approaching, i favor floating all loans right now." -Victor Burek, Open Mortgage
"What a difference a day makes! Solid gains in MBS market today as stocks dove and durable goods data came in below market expectations. We recouped yesterday's losses, and MAY be headed back to our downward rates trend. If you're floating now, may want to see what tomorrow brings. As of 2:30 edt, only one lender repriced better per MBS Live, rather odd considering our gains. Tomorrow's rate sheets may well reflect today's movement." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"Mortgage bonds advanced today bringing home loan rates down a bit. Bonds do have some difficult resistance over head and unless we are able to break above this resistance rates may not be able to decline any further. Locking in now and protecting yourself makes sense whether you are closing a couple of weeks from now or over a month from now." -Manny Gomes, Branch Manager, Norcom Mortgage
"The stocks lower-bond prices higher-rates lower correlation rings true today. For short term locks this was an opportunity to protect some good pricing and I recommend doing so if you're closing within 15 days. Longer term, a floating position may be warranted although we have the Final GDP report for the 2nd Quarter due and any stronger than anticipated growth numbers could hurt us. With month end and quarter end fast approaching we could see some position squaring from traders that also may benefit us. Kind of a toss up longer term but a wait and see approach is probably okay for now." -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).