March 12, 2015
Mortgage rates were mixed today depending on the lender, but moved just slightly lower on average. This wasn't the case this morning as essentially all lenders came out with noticeably lower rates following the weaker-than-expected Retail Sales report. As the day progressed, early gains in bond markets faded, especially after the afternoon's 30yr Bond auction. While that refers to 30yr Treasuries, the goings-on in the Treasury market always have some effect on the mortgage-backed-securities that dictate mortgage rates. Today was no exception, and as prices fell into the afternoon, most lenders 'repriced' to higher rates.
The fact that some lenders have yet to reprice likely accounts for the discrepancy between them. If we assume that non-repricing lenders will either reprice before the end of the day or build the weakness into tomorrow's rate sheets, we're left with that "sideways to slightly lower" rate situation on average. That puts us very close to the lowest levels in March, seen on the first two days of the month. Most lenders are quoting conventional 30yr fixed rates of 3.875% to top tier borrowers. A few of the stronger lenders are at 3.75% and fewer still remain at 4.0%.
The notion that rates are near the lows of the month contrasts starkly with most mortgage rate headlines this morning. Those headlines are not wrong. They're just stale. Here's why:
Every Thursday, Freddie Mac releases their weekly mortgage rate survey, which is the longstanding industry standard for a delayed look at at mortgage rate offerings. It is important to keep that delay in mind though. Reason being: Freddie releases the report at 10am (or slightly earlier under embargo) to news outlets who then all rush to report the same headline on Thursday morning. But the data for the report is based on survey responses received primarily at the beginning of the week, and as we know, even a single day of big market movement can have a big effect on rates.
So any time that there is a good amount of movement in the same direction over the course of the week, and especially if the previous Thursday/Friday saw rates move in the other direction, Freddie-based headlines will no longer to apply to the rate reality at the time they are printed. That's exactly what's happened over the past week as rates surged higher on Friday. By the time Freddie's survey was open for responses this week, rates had only just begun falling. Some of the bigger moves came in after most of the survey responses were in. As such, today's rates are actually lower than they were for last week's Freddie report, despite today's data showing a sharp increase.
Loan Originator Perspective
"A much worse than expected Retail Sales report helped lender pricing improve overnight. The gains were short lived as the final auction of the week was a dud. Many lenders have already repriced for the worse. If your lender did reprice worse, i would float overnight. If your lender hasnt repriced, and you are within 15 days of funding, i would go ahead and lock today." -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.875
- FHA/VA - 3.5
- 15 YEAR FIXED - 3.25
- 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 was Europe and the introduction of European quantitative easing.
- With European QE having now begun, we're on high alert for a big picture bounce in European economic data, sentiment, growth, and rates. The more it looks like such a bounce is taking hold, the greater the risk that domestic bond markets and mortgage rates will also experience a big bounce higher. There's already a possibility that the bounce occurred in February, and we'd need to move back to January levels before ruling that out.
- While there's no guarantee that the current bounce will prove to be "the big one," it makes better sense from a risk/reward standpoint to assume it will be until that can be ruled out. That means favoring locking over floating in most scenarios, except when otherwise noted as a tactical opportunity.
- 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).