February 12, 2015
Mortgage rates were feeling left out of the cheesy, obligatory, early February references to certain love-themed holidays. Markets hadn't shown rates any love for 8 straight business days--every day in February. That finally changed today, albeit only slightly. European headlines left bond markets (which guide mortgage rates indirectly) in limbo overnight and weak economic data this morning helped trading levels to improve. That, in turn, allowed most lenders to improve rate sheets by a small amount compared to yesterday's latest offerings. 3.75% and 3.875% remain the two most prevalently quoted conventional 30yr fixed rates for top tier scenarios.
So the love is finally back, but will it stay? The jury is still out on that topic as the markets will be waiting for news out of Europe at the beginning of next week. Yesterday's meeting with Greece and its Eurozone creditors failed to produce any change in Greece's current collision course. Officials noted that they'd be working on "something" on Monday, but were clear to say that markets shouldn't get their hopes up. Markets likely won't be too eager to move too far in either direction until there's more clarity out of Europe. That decreases both the risk and reward associated with floating in the short term, though the risks should always be respected if you can't afford to lose any ground if the market moves against you.
Loan Originator Perspective
"Looks like the streak of bad days will end today. MBS are holding onto modest gains but with supply out of the way and a much worse than expected Retail Sales report, the gains are far less than what we would hope. As of mid afternoon, a few lenders have repriced for the better but most rate sheets i have seen are still worse than yesterday's. If you are still floating, i would continue to float to see if lender rate sheets will catch up tomorrow morning. " -Victor Burek, Open Mortgage
"I will give the same guidance as yesterday - no shame in locking in at these rates. Also, keep in mind that markets are closed on Monday, so don't expect any change from tomorrow's close in terms of rates or price." -Ira Selwin Vice President of Capital Markets at US Mortgage Corporation
"As of 2PM EST, both MBS and treasuries had slight improvements for the day, which certainly beats our recent losing streak. The Greece vs. ECB drama is on hold for a few days, and there's no huge incentive for rate markets to improve. We'll take what we got, but it's not what we were looking for. Close to closing? Might want to get locked up, in case the tide turns." -Ted Rood, Senior Originator
"Bonds appear to finally catch a break and have an up day for once. It was not a big up day but after a series of negative sessions any up day is welcomed. Bonds are at such over sold levels conventional wisdom tells me we should see lower rates on the horizon or at the least a halt to the increases. Much the future direction will greatly depend on the results of the Greek negotiations. However I do believe a resolution is already priced into the market. If they fail to come to an agreement come Monday we can certainly regain a lot of the recent looses. Float for the time being but keep a very close eye on the market." -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.75-3.875
- 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).