October 7, 2015
Mortgage rates put in another day with minimal movement today. If there was a detectable bias, it was toward slightly higher rates, but many lenders didn't move at all. That leaves the predominant range of conventional 30yr fixed rate offerings between 3.75% and 3.875%. It's worth mentioning that the most common rate quotes don't normally exist in as wide a range as we're seeing now. Recent volatility and varying lender strategies have resulted in a clear gap between between the front of the pack and the rest of the pack.
Additionally, we're starting to see some lenders adjust their default lock time frames with the onset of the new TILA/RESPA Integrated Disclosure (TRID) rules. The public-facing campaign refers to this as "know before you owe." Either way, the rules attempt to make two forms that confused borrowers who didn't have adequate explanation and education from their lender into one form that will continue to confuse borrowers if they don't have adequate explanation and education from their lender (is there a theme here?).
Hopefully, a borrower without any education and explanation would be able to glean information from the new form better than they could from the old forms, but that's neither here nor there when it comes to rates and lock time frames. The important part is that along with the new rules come new timing requirements for when the various disclosures can and must go out.
In the best cases, these rules add 2-3 days to total turn times, but in some lenders' business processes, they are adding significantly more--plenty to justify an extra 15 days of lock time. That matters because the longer the lock time frame, the higher the upfront cost associated with any given rate. Granted, this would only make for a minor difference overall, but it could contribute to any discrepancies you're seeing between lenders.
Loan Originator Perspective
"Guess what? Rates were essentially flat again today. We're back to "the range is the range until it isn't anymore", and who knows when "anymore" will arrive. Rates are still closer to the low end of the scale than the upper, which leaves room for them to creep higher without any specific motivation. I'm still in "lock sooner rather than later" mode for most borrowers. If you choose to float, remember to be realistic about your expectations, markets don't always move the way we'd like them to." -Ted Rood, Senior Loan Originator
"I am sticking with my advice from yesterday. Tomorrow we have our final treasury auction for the week. I am hopeful that we see some sort of improvements following that as it is very common. Plus, we have some support just above where the 10 year is currently trading. So float the highs of the range, lock the lows..." -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).