January 26, 2015
Mortgage rates were unchanged in most cases today, though some lenders were microscopically higher or lower compared to last Friday. Any attempts at more meaningful market movement were seen in the overnight trading hours in Asia and Europe. Rates stood a good chance to improve after election results in Greece, based on the market's reaction overnight. By morning, however, bond markets (which inform mortgage rates) were right back were they spent most of Friday, thus leaving us with the relatively unchanged mortgage rate sheets. Most lenders are still quoting 3.625% for top tier conforming 30yr fixed scenarios.
Apart from the overnight drama in Europe, there wasn't much going on domestically today. In general, markets are still sorting out their reaction to last week's even bigger news regarding Europe's new Quantitative Easing measures. Today is the first day where European Bond markets took a break from the relative euphoria that pervaded Thursday and Friday's trading. If that 'break' continues tomorrow, it would increase the risks that the recent trend toward long-term low rates is at risk of shifting.
Loan Originator Perspective
"Over the weekend, Greece went to the polls and voted in the Syriza party which wants to end austerity and renegotiate their debt. I was hopeful this would lead to a rally in bonds, but that didn't happen. Rates today are the same as Friday so if you floated over the weekend, you didn't lose anything. I continue to believe the news out of Greece will continue to benefit bonds with a flight to safety trade. I continue to favor floating all loans to see if what is happening in Europe can spark a further rally in bonds leading to lower rates." -Victor Burek, Open Mortgage
"Rate markets stayed fairly flat today, despite continued EuroDrama. There's nothing wrong with treading water, especially at these rates. While we can't take current pricing for granted, the long term trend for rates still looks flat to slightly downward. Floating borrowers, as always, need to have a plan on when to lock when rates move, whether it's better or worse!" -Ted Rood, Senior Loan Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.625
- FHA/VA - 3.25
- 15 YEAR FIXED - 3.0-3.125
- 5 YEAR ARMS - 3.0 - 3.50% depending on the lender
Ongoing Lock/Float Considerations
- 2015 began with a strong move to the lowest rates seen since May 2013. The catalyst has been and continues to be Europe.
- European bond yields trended constantly lower in 2014, thus playing a prominent role in keeping US rates lower than they otherwise might be. Many feel that Europe will continue to slide until their central bank engages in US-style quantitative easing. Some see this happening in early 2015. In any event, we're looking for a turn in Europe, first and foremost, before worrying about the longer-term trend in bond markets being at serious risk of reversing.
- It's impossible to know when Europe will turn a corner, and even then it's only the sort of thing we'll be able to observe in hindsight. That means every head-fake toward higher rates runs the risk of developing into a longer term rise, even if those risks vary greatly in terms of probability. Clients with longer term time horizons and who otherwise don't mind losing some ground in exchange for the chance at locking even lower rates are the only ones who should float. Clients who must close by a certain date or who can't afford to lose any ground on rates should generally be locking even though the longer term trend has been in their favor for over a year now.
- 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).