January 29, 2015
Mortgage rates were steady to slightly higher today on average. Some lenders were actually slightly lower, but they were the exception. In contrast to yesterday, the bond markets that underlie rate movements were exceedingly calm, and what little movement there was came in measured doses. This sort of low-altitude, sideways bounce is a fairly common occurrence following a bigger move lower in bond markets.
The distinction between bond markets and mortgage rates is important here, because mortgage lenders haven't been able to pass along all of the gains implied by trading levels. If markets manage to calm down a bit, that means rates have some room to improve even if trading levels simply hold steady. That process can only happen gradually over multiple days and could easily be thrown off by more volatility.
Even if rates held steady, they'd be doing so essentially right in line with the best levels since early May 2013. 3.625% remains a widely-available conforming 3yr fixed quote for top tier scenarios and several aggressive lenders are at 3.5%.
Loan Originator Perspective
"I continue to favor floating. Some of the gains we enjoyed yesterday have disappeared today but lender pricing is basically unchanged. As i have said many times, lenders are slow to pass along the gains so even with today's weakness we have same rates as yesterday." -Victor Burek, Open Mortgage
"Mortgage Rates have given back small gains from yesterday's rally, but there does not appear to be a true change in direction. If you can stomach some price changes day to day, with the overall goal of capturing potentially lower mortgage rates...I think floating is a sound option at these levels. The overall bias appears to be a desire to test for lower rates, I hope we do and you caputre it." -Brent Borcherding, brentborcherding.com
"We gave back a fraction of yesterday's strong gains today, but that's no unusual. Both treasuries and MBS are still in their "slowly trending downward" track. It's almost a "can't lose" proposition for borrowers: today's rates are great, AND they MAY continue downward. Don't take the market for granted though, if you like your pricing, be ready to lock." -Ted Rood, Senior 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).