September 9, 2014
Mortgage rates finally delivered an unequivocal performance today. Unfortunately, it wasn't the kind we were hoping for. Rates moved higher at their fastest pace in weeks, reaching levels not seen since early August. To put that in context, however, many borrowers will STILL be looking at the same rate they were quoted yesterday, but with higher closing costs. 4.125% is still a widely available conforming 30yr fixed rate for flawless borrowers, but we're much closer to 4.25% being more prevalent after today's weakness.
As we discussed yesterday, broader bond markets suggested the possibility of further weakness in the short term, and this is that weakness. While short term weakness could continue, the longer term trend of low, stable rates in 2014 remains intact for now. Keep in mind, this isn't a guarantee that we'll make it to new lows, or even that the current weakness won't continue--simply that the recent rise in rates hasn't been enough to conclude that the good times in 2014 are over.
Loan Originator Perspective
"Another day of the market not moving in our favor, we still don't know if this is a long-term trend or not. There is no shame in locking your loan at these levels, but if you want to float, float with caution, keep an eye out for any possible market movers next week (9/17), and always be in contact with your Loan Originator." -Ira Selwin, VP of Capital Markets, US Mortgage Corporation
"There is nothing to over think at this point. Rates, in the near term, are moving higher and if you're on a day to day decision making process....LOCK." -Brent Borcherding, brentborcherding.com
"Short term closings should always consider locking, but if you have some time i think floating might pay off. We have new supply of treasury debt coming to market this week and it is pretty common for rates to rise ahead of this new supply. It is also common for rates to rally once the new supply is absorbed by the markets. We also still have quite a bit of geopolitical risk that could benefit rates. Europe postponed new sanctions against Russia for a few days yesterday, and these sanctions have more teeth to them then the prior ones as they target Russia's energy sector. If these sanctions go into effect, you can bet Russia will respond with sanctions of their own. " -Victor Burek, Open Mortgage
"Well, loan pricing suffered further losses today as rates rose. It appears Ukraine and EU asset purchases are no longer motivating the market, and short term momentum is towards higher rates. We haven't reached the point of frantic LO's scrambling to lock all loans yet, but those floating are certainly seeing their pricing worsen. MBS Live shows we've lost (on average) about .5% to loan pricing (not rate) in the past three days. Pretty substantial move, let's hope we stop the bleeding soon." -Ted Rood, Senior Mortgage Planner, tedroodteam.com
"It is official. We are now moving towards the higher end of the current rate range. This is not to say we will not drift back down but timing the move perfectly is not an exact science. That being said locking is the only move at the moment, especially if you are closing in the coming weeks or until we see momentum shift and rates start heading back down." -Manny Gomes, Branch Manager, Norcom Mortgage
"Rates had been in a nice rally to new lows recently, but the momentum looks to be shifting to higher rates in the near term. Could just be a pause, but locking in now is not a bad call. Too close to recent lows to think you’re going to see a big drop" -Michael Owens, VP of Mortgage Lending at Guaranteed Rate, Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.125-4.25
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25%-3.375
- 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).