September 8, 2014
Mortgage rates were higher OR lower today, depending on the lender. Some of the differences in pricing strategies have to do with Friday afternoon's volatility which saw some lenders raise rates more aggressively than others. There was a similar breakdown in financial markets this afternoon which, once again, prompted lenders to recall rate sheets for a mid-day 'reprice' to higher rates. Thankfully, these changes are so small that they don't even affect the rate itself. That means only closing costs are moving higher.
Even after the reprices, the average rate quote remains in similar territory to Friday, on average. For the most part, the most prevalent conforming 30yr fixed rate for top tier borrowers has been incessantly glued to 4.125%. Slightly-less-than-flawless scenarios are still very well priced at 4.25%.
While mortgage rates have been glued to their 2014 floor, broader bond markets have weakened in such a way that there's some concern for further losses in the short term. In other words, the longer-term trend remains intact, but we're currently in the middle of a correction which is taking place inside that trend. Think of this like bumper bowling where one bumper equates to lower rates and the other to higher rates. We're just hitting that "higher rate bumper," but haven't yet broken through to the next lane. Bottom line, weakness could continue in the short term, but the jury is still out on the longer term outlook. As such, locking is the safer bet for those with loans currently in process.
Loan Originator Perspective
"I'm firmly committed to locking today. Rates are at too large a risk for a move higher, and there is even some momentum in that direction. Until we see a real attempt to move lower, locking will be my day to day advise." -Brent Borcherding, brentborcherding.com
"The benchmark 10 year note is almost at a 1 month highs today and continued weakness will confirm this bearish trend. If you can tolerate the risk, and the potential for a higher rate and payment, i would continue to float in hopes we bounce lower tomorrow. If you are border line on approval at current rates, or just want to remove all risk, then locking should be the way you go." -Victor Burek, Open Mortgage
"Mortgage Bonds opened higher setting a positive tone for the day but things started taking a turn during the trading session. This does not bode well from a technical level and tomorrows trading action will be very telling. It makes sense to lock in today ahead of tomorrows trading for should we break lower in mortgage bond pricing higher rates will be the outcome. " -Manny Gomes, Branch Manager, Norcom Mortgage
"Rates appear to want to push higher here but have not broken convincingly through technical resistance just yet. However, any follow through weakness tomorrow could be the impetus to continue to push rates higher so I would certainly be defensive right now and lock anything that's closing in the next 15 days. If we get further weakness tomorrow I would be inclined to lock period." -Hugh W. Page, Mortgage Banking Officer, Seacoast National Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.125
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25%
- 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. The most prevalent top tier rates haven't changed since mid May
- 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).