March 13, 2015
Mortgage rates were slightly higher today, but remained much closer to the best levels of the week seen yesterday. In general, this week has served as a correction to last Friday's excessive losses. In that regard, it has been almost totally successful considering today's rates are right in line with last Thursday's. Most lenders continue to quote a conventional 30yr fixed rate of 3.875% for top tier scenarios. The more aggressive lenders remain at 3.75% and a small minority is still at 4.0%. Most borrowers will see today's weakness in the form of slightly higher up front costs for the same rate as yesterday.
There was not much going on today in the financial markets that underlie mortgage rate movements. The economic data in the morning served as a temporary speed bump for a moderately weak trend that had been intact since yesterday morning ("weakness" equates to upward pressure on rates in this context). But once again, our perceptions of weakness and strength are largely arising due to short term 'corrections.' In the current case, yesterday's Retail Sales data started the morning off with plenty of strength for bond markets. The weaker trend mentioned above was simply a correction to that strength. It ran its course by this morning and left bond markets to drift sideways into the weekend.
Next week brings the FOMC Announcement, which can have a significant impact on rates. It could be good or bad for us, but either way, the potential movement is huge.
Loan Originator Perspective
"The rate sheets i have viewed this morning are worse than yesterday's opening sheets despite many lenders improving pricing this morning. If you are within a couple weeks of closing, you should consider locking especially if you are happy with the current terms offered. I favor floating all loans over the weekend as i am not a fan of locking on Fridays." -Victor Burek, Open Mortgage
"Overall good week for all of us rate chasers, and phenominal week considering what took place last Friday. Next week brings a potential major market moving event with the FOMC. Wednesday is D-Day, therefore I am in heavy favor of floating cautiously until then. As always, any loan that is cleared to close or in a 10-15 day window of closing is predominantly locked. Have a great weekend!" -Constantine Floropoulos, Quontic Bank
"Well, we survived the week after NFP intact, and actually gained roughly 1/2% in pricing over the last 5 days. No definitive moves down, but pricing improved 4 of 5 days. The Federal Open Market Committee (aka: Fed) meets next week, and its statement on Wednesday could go a long way towards guiding rates. References to a robust recovering economy = higher rates, concerns over deflation, economic headwinds = lower rates. For now, I'm in a neutral bias, but will have a sharp eye on floating loans Wednesday AM prior to the Fed minutes' release." -Ted Rood, Senior Originator
"Mortgage rates improved slightly today and I personally would lock and take in those gains. My suggestion to lock isn't because I see rates rising, per say, its just that I don't see much likelihood of improvement into next week before the Fed. So, by choosing to float today you're really needing to commit, in my opinion, to floating through all of next week and I don't think most people would want to risk that." -Brent Borcherding, brentborcherding.com
"Two big misses on important economic data and an equity slide was not enough to propel mortgage bonds higher. In normal times rates would come down on a day like this but we are certainly not in normal times. During periods like this the risk of floating tends to be to high. If you are a risk taker you can float into next weeks FOMC meeting but those conservative in nature should be locking." -Manny Gomes, Branch Manager Norcom 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).