February 11, 2015
Mortgage rates are in the midst of a substantial losing streak. Today's outright losses weren't that bad in and of themselves, but they have the distinction of making today the 8th straight day where rates have been higher. To reiterate a point I made yesterday, February is currently the worst month for mortgage rates since November 2013, and today's moderate weakness only makes that more true. Top tier purchase scenarios are increasingly being quoted conventional 30yr fixed rates of 3.875% though 3.75% remains just a bit more prevalent. Most borrowers would still see the same contract rate as yesterday, but with higher upfront costs (or a lower lender credit).
If there's a consolation here it's that 8 days is about as long as these sorts of streaks last before taking a break. Additionally, the pace of the weakness has begun to to subside. If there's cause for concern, it's that headlines came out late in today's trading session that began pushing bond markets into weaker territory. Had it been earlier in the day, more lenders would have repriced based on that market weakness (meaning they would have raised rates for the rest of the day's locks). When late market movement like that fails to make its way onto today's rate sheets, it will simply be baked into tomorrow's opening levels.
The major caveat here is that there can be plenty of market movement overnight to offset or exacerbate the weakness. The takeaway is that rates were dealt a minor blow this afternoon that hasn't yet made it on to most rate sheets. If overnight market movement is strong enough, we won't notice the weakness, but if it's flat or worse, rates will be higher again tomorrow morning.
Loan Originator Perspective
"About the only good news we have had all week are two very strong auctions. Tomorrow we have the final auction of the week. I am hopeful that it is also well received and we get a bond rally once the new supply is over which inclines me to recommend floating. However we still have the Greek situation in play. If they come to some sort of agreement or kick the can down the road, that could pressure rates higher so floating is risky. " -Victor Burek, Open Mortgage
"Though we have lost some ground, overall rates are still in a great place, and there should be no shame in locking in this current environment. " -Ira Selwin Vice President of Capital Markets at US Mortgage Corporation
Today's Best-Execution Rates
- 30YR FIXED - 3.75
- FHA/VA - 3.25-3.5
- 15 YEAR FIXED - 3.00-3.125
- 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 has been and continues to be Europe.
- European bond yields trended constantly lower in 2014, thus playing a prominent role in keeping US rates lower than they otherwise might be. Many feel that Europe will continue to slide until their central bank engages in US-style quantitative easing. Some see this happening in early 2015. In any event, we're looking for a turn in Europe, first and foremost, before worrying about the longer-term trend in bond markets being at serious risk of reversing.
- It's impossible to know when Europe will turn a corner, and even then it's only the sort of thing we'll be able to observe in hindsight. That means every head-fake toward higher rates runs the risk of developing into a longer term rise, even if those risks vary greatly in terms of probability. Clients with longer term time horizons and who otherwise don't mind losing some ground in exchange for the chance at locking even lower rates are the only ones who should float. Clients who must close by a certain date or who can't afford to lose any ground on rates should generally be locking even though the longer term trend has been in their favor for over a year now.
- 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, 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).