September 30, 2014
Mortgage rates were slightly higher today leaving September s one of only 3 months this year with noticeable upward movement. Things could have been worse had it not been for the steady improvements seen during the second half of the month. Today was an exception to that recent trend, but it's tempered by the fact that yesterday's gains were the best of the month. The only downside is that the most prevalently-quoted conforming 30yr fixed rate for top tier borrowers remains 4.25% whereas it would have likely moved to 4.125% if rate went the other direction today.
These movement considerations may be small scale compared to what lies ahead. Several big-ticket events are coming up in the second half of this week and they stand a good chance to increase the level of volatility. That's neither good nor bad necessarily, but simply means the next pronounced move could be bigger than those seen over the last few weeks.
Loan Originator Perspective
"Yesterday I said that as long as the 10 yr remained under 2.5% that I'd suggest to continue to float. My stance has not changed, though it still remains risky. Pay close attention and be ready to lock, because a move back above 2.5% means this was only a failed test at lower rates. Floating cautiously, and hoping we see the trend of lower rates continue." -Brent Borcherding, www.brentborcherding.com
"With today being month/quarter end, I would recommend to lock everything up that is within 30 days of closing. I suspect, barring any geopolitical tapebombs, that rates will gradually worsen between now and the payrolls report on Friday. The near term direction of interest rates will be set on Friday, so if you do not lock today, then i would plan on floating until at least next week. If the payrolls report is worse than expected and we dont get any large revisions better to prior months, rates will improve so floating could pay off, but it is extremely risky." -Victor Burek, Open Mortgage
"Pricing improved this morning following some disappointing economic data, and 10 year bond yields broke the important 2.5% level (2.48% at press time). The last two days, however, are essentially pre-cursers to the data we'll see the next three days (chiefly ECB statement, weekly jobless claims and the September NFB employment report). These will determine where markets head, and cannot be ignored by floating borrowers. It's a "high risk/potential high reward" situation. If you choose to float into the next three days, do so with the realization that pricing can change quickly, whether for the better or worse." -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).