October 9, 2015
Mortgage rates were generally quiet today as bond markets wound down ahead of the 3-day weekend. While stock markets and many businesses will be open as usual on Monday, banks and bond markets will be closed. This means that many mortgage lenders will either be closed, or otherwise simply not making any rate sheet adjustments. Point-being, it's not uncommon to see movement in interest rates level-off heading into these longer weekends. Unfortunately for the current week, that means we're leveling off at the highest rates of the month.
The silver lining, of course, is that rates are still lower than almost all of September and the average conventional 30yr fixed rate remains in the high 3's. Specifically, most lenders are quoting 3.875% on top tier scenarios with a few of the most aggressive lenders at 3.75% and a few others back up to 4.0%. Most borrowers would not have seen any change in rates from yesterday although the borrowing costs rose very slightly in some cases.
In the bigger picture, financial markets are at a crossroads. This is true for both stocks and bonds, with each trying to determine if it will move back into the the ranges seen in June and July or if the recent move lower in yields and stock prices was merely the first wave of a longer campaign. If we take the Fed at their word, and if we forego any concerns about increasingly weak global economic growth, there is certainly more risk that rates move quickly higher vs quickly lower. Hoping for lower rates is a long-term game meant only for economic pessimists who know the fact that the world is doomed will come to light fairly shortly. The latter must also be willing to pay higher rates if they end up being wrong (or otherwise unwilling to wait long enough to be right).
Loan Originator Perspective
"Bond markets got an early start on the 3 day weekend, opening slightly lower and moving little during today's session. All in all, we lost about 40 bps in pricing between Monday's highs and current levels. As has been the case, "the range is the range until it isn't" still holds true. Bond markets are closed on Monday, so if you float this weekend, you're probably committing to do so until Tuesday. I don't see huge rate moves in either direction looming on the horizon. If you float, do so with realistic expectations of your possible gains. Rates are highly unlikely to drop .25% in a short time, you're far more likely to see minor adjustments in closing costs/credits. Have a great weekend, all." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 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).