November 20, 2015
Mortgage rates started the day slightly lower compared to yesterday's latest offerings. Mid-day weakness in bond markets resulted in most lenders repricing to higher rates in the afternoon. The net effect leaves rate sheets in roughly the same territory day-over-day, though this varies slightly from lender to lender. The most prevalently-quoted conventional 30yr fixed rate continues to be 4.0% for a small majority of lenders with the rest up at 4.125%.
Keep in mind that the difference between a lender quoting 4.0 and 4.125% isn't necessarily as simple as the 0.125% might make it seem. The effective rate takes the upfront costs into consideration as well as the rate that dictates the payments. At any given lender, it would cost somewhere between 0.007% and 0.01% of the loan amount to move down 0.125% in rate. The lenders quoting 4.125% might be offering a lender credit. The lenders quoting 4.0% might be offering no credit. In that example, the lender quoting 4.125% could be at an effective rate of 4.07%, for instance. The 0.07% is more typical gap between lenders quoting these two rates, even though the contract interest rates are a full .125% apart.
Loan Originator Perspective
"This morning was a pretty good time to lock in loans. As the day progressed, traders left on vacation and bonds took a turn for the worse. At this point, if your lender has repriced for the worse, I would look to float over the weekend and evaluate pricing on Monday." -Victor Burek, Churchill Mortgage
"Bonds bounced slightly lower mid day today, and pricing worsened for some lenders. We're still within recent ranges, but today's action is a good reminder to not take pricing stability for granted. I'm still thinking lock on loans within 30 days of closing, looking at risk tolerance/pricing sensitivity for loans with more time." -Ted Rood, Senior Loan Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.0%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25%
- 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).