September 26, 2014
Mortgage rates rose just slightly today, but the move was so small that some lenders are unchanged or even a bit better than yesterday. On top of that, the week has been a calm one, resulting in modestly lower rates than those seen last Friday.
Although today's GDP report put a seemingly large number in the headlines (+4.6%), financial markets couldn't have cared less. It's important to keep in mind that GDP is based on the CHANGE from the previous reading. Because the first quarter was so awful, the 2nd quarter was always destined to look better than it otherwise would, had it been preceded by a normal Q1.
Even then, the bond markets that underlie mortgage rates have been almost completely uninterested in taking cues from economic data, even though that's historically what they do. There are a lot of other sources of inspiration depending on the day, but today's moderate weakness came from news that Bill Gross, the manager of the world's largest bond fund, was leaving the company he founded more than 30yrs ago to join another, much smaller company.
This turned out to be a bigger deal for US Treasuries than it did for mortgage rates however. The most prevalently-quoted conforming 30yr fixed rate for top tier borrowers remained 4.25% with 4.125% not far behind.
Next week likely brings significantly more volatility as traders reposition their holdings for a new quarter. The European Central Bank releases its next policy announcement on Thursday, and these have been incredibly important events--much more so than domestic economic data.
Loan Originator Perspective
"Lock is my guidance as I think it's the safest and smartest decision. If you we eventually break lower, I believe it will be by a significant amount and a float down in rate should be offered by your lender. Until that break occurs, which it may or may not, the greatest risk is for higher rates. " -Brent Borcherding, www.brentborcherding.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).