October 6, 2015
Mortgage rates managed to hold their ground in most cases today. That's a refreshing turn of events considering the forceful move higher seen on Friday afternoon and yesterday. Granted, that spike in rates followed a strong move to the lowest levels in over 5 months on Friday morning, but it was still not fun to see all of Friday's gains erased. In that sense today didn't add any additional insult to injury. Most lenders are right in line with yesterday's latest levels though there are a few who marginally increased costs. That means that borrowers would still likely be seeing the same note rates as yesterday, with Conventional 30yr fixed loans being quoted in a range from 3.75 - 3.875%.
To reiterate a point made yesterday, with the exception of last Friday, rates are as low as they've been since late April. Rates spent plenty of time dipping their toes in the water of "high 3's" over the past few months, but this is the best sustained run we've had with 3.75% being available at more than a few lenders. And again, keep in mind that almost any rate that's available at one lender would be available at other lenders as well, but the costs to obtain that rate could vary greatly between lenders on opposite ends of the spectrum.
Loan Originator Perspective
"Bonds spent the day firmly back in "the range" as pricing was virtually identical to Monday's. A few lenders repriced better mid day, guessing those improvements were marginal. It's somewhat disconcerting that the NFP miss was shrugged off within hours, rather than providing longer term motivation for rates to improve. Not sure rates are headed way up/down soon, they seem quite content where they are. I'll lock most applications, if borrowers are happy with pricing. One in the hand versus two in the bush seems appropriate here." -Ted Rood, Senior Loan Originator
"A weak treasury auction was not enough to derail mortgage bonds. Gains were however small and it is looking more and more likely we are topping out in prices meaning bottoming out in rates for the time being. I would be locking for floating is just to risky." -Manny Gomes, Branch Manager Norcom Mortgage
"First couple days of this week hasn't been the best for rates. We are in a auction cycle with 3 year notes being auctioned today and the final auction on Thursday of 30 year bonds. It is very common for us to rally once all the new supply is out of the way. So if you have time, I would float and see if rates can improve later this week. However, if you like the current terms being offered, nothing wrong with locking." -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.75 - 3.875%
- FHA/VA - 3.5%
- 15 YEAR FIXED - 3.125%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2015 began with a strong move to the lowest rates seen since May 2013. The catalyst was Europe and the introduction of European quantitative easing. Investors bet heavily the move lower in European rates and domestic rates benefited as well. But with those bets finally drying up in April and with the Fed seemingly intent on hiking rates in the US, May and June saw a sharp move back toward higher rates. The implicit fear is that global interest rates set a long term low in April, and have now begun a major move higher.
- July said "not so fast" to that potential "big bounce." Some of the data began to suggest the Fed is still a bit too early in talking about raising rates in 2015--particularly, a lack of wage growth or any promising signs of inflation. But Fed proponents maintain that low inflation is a byproduct of temporary trends in the value of the dollar and the price of oil, and that once these factors level-off, inflation will ultimately return. That side of the argument suggests that inflation could increase too quickly if the Fed hasn't already begun normalizing interest rates.
- With all of the above in mind, locking made far more sense for the entirety of May and June, and we were not shy about saying so. The second half of July saw that conversation shift toward one where multiple outcomes could once again be entertained. In other words, we went from "duck and cover!" to "let's see where this is going..." Even the Fed took a similar stance when it held off raising rates when it had an excellent opportunity to do so in September's meeting.
- 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, conventional 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).