November 10, 2015
Mortgage rates did something they haven't done on any other day so far this month. They avoided moving higher. While that's a welcome change, to be sure, today's rates didn't move any lower on average. This keeps them in line with the highest levels in nearly four months. The journey has been a quick one as well, with the spike from 6-month lows to 4-month highs happening in just under 2 weeks. Lenders are easily back into the low 4 percent range. There's a relatively even split between aggressive lenders quoting 4.0% and less aggressive lenders at 4.125% on top tier conventional 30yr fixed scenarios.
Yesterday, we discussed the possibility of rates experiencing a day like today simply because rates are increasingly likely to take a breather after an extended move in the same direction. This, then, is that breather. These little pockets of relief can last for 1-3 days before rates begin rising again, or they can be the first, timid indication of a ceiling. With bond markets (which dictate mortgage rates) being closed tomorrow, we may simply be seeing investors taking a break as opposed to any real change in the momentum. It would be easier to believe that today is something more positive than that if the good times continue after Veterans Day.
Loan Originator Perspective
"Rate markets caught a small break from their recent losses today, as pricing improved marginally and several lenders issued improved rate sheets during the day. In my case, pricing gained about 14 bps on the new sheets, not earth shattering, but certainly a move in the right direction. Today's 10 year treasury auction was well received, and likely contributed to MBS' gains. It's WAY to early to call a top on rates, we'll see what Thursday/Friday bring since markets are closed tomorrow for Veteran's Day. From a Marine dad to all those who've served and are serving, thanks for your sacrifice and dedication." -Ted Rood, Senior Loan Originator
"The selling spree in mortgage bonds came to and end today and the Ten year yield is not back under 3.3%. This is very good news for rates going forward. Sellers are done selling for now and buyers are entering the market and picking up much more attractive yields than were available a week ago. With no trading tomorrow you will not likely see better available mortgage rates until Thursday. I am back to 100% floating until then." -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.0-4.125%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25-3.375%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- 2015 has been largely about rates rising unevenly from a long-term low brought about by the onset of quantitative easing in Europe. In May and June, the Fed increasingly began telegraphing a 2015 rate hike. At that point, the "rising rate environment" seemed like a sure thing, but the Fed's plans hit several snags. Economic data began deteriorating at home and abroad, causing markets to rethink the higher rate rhetoric. Mortgage rates hit 6 month lows at the end of October, just as the Fed surprisingly changed it's policy statement to specifically suggest December as a rate hike possibility (something they haven't done since 1999).
- In the bigger picture, rates had been at a crossroads, trying to determine if they would move back to 2015 highs or if the late summer swoon was merely the first wave of a longer campaign.
- While there is still plenty of room to be concerned about increasingly weak global economic growth, that's not a solid enough reason to float in this environment. With the Fed almost certainly on track for a December rate hike, there is much more risk that rates move quickly higher vs quickly lower. The big picture global malaise can serve as the basis for long term hope, but in the short term, assume upward pressure on rates when formulating your strategy.
- 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).