February 19, 2015
Mortgage rates didn't move much today on average, but some lenders were noticeably better or worse compared to yesterday. It's not that they were confused about which way markets were moving, simply that yesterday afternoon brought a significant amount of volatility. Some lenders were able to adjust for that by the end of yesterday while others were still catching up a bit today. The net effect is that 3.875% remains the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios. Some of the more aggressive lenders are still offering 3.75, while others
The fact that rates were unable to capitalize on yesterday's decent improvement is very important. It lets us know where the focus is for the bond markets that underlie rate movements. Rather, it confirms that focus is where we assumed it to be: squarely on Europe. The large, long-term mover toward lower rates in Europe over the past year has been the most important factor in our ability to carve out increasingly lower mortgage rates. Europe has reached a point where some market participants are beginning to wonder when rates will bottom out. The sharp move higher in February reflects that.
As such, we remain at risk, or at least in a position that requires a more defensive approach to locking and floating. Realistically, floating in the hopes of lower rates won't make much sense until/unless February's trend is definitively broken.
Loan Originator Perspective
"Rates appear to have hit a bottom right now and are showing signs they want to drift higher somewhat. In order to resume any sort of sustained decrease from here we'll need some serious help and there is certainly serious risk here of rates moving higher from here. I would be locking up everything right now." -Hugh W. Page, Mortgage Banker, Seacoast Bank
"Rates drifted slightly higher as of mid-day. There's just not much "flight to safety" raising bond demand for now, despite the ECB/Greek drama. The good news is we retained most of yesterday's gains, the bad news is that there's still little momentum towards lower rates. I'll be locking early in the loan process until the trend breaks!" -Ted Rood, Senior Originator
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).