March 19, 2015
Mortgage rates moved higher over the course of the day today as financial markets underwent a correction following yesterday's big move lower in rates. Because today's initial rate sheets were even better than yesterday's, the move merely brought us back in line with yesterday, on average. Some lenders are slightly higher or lower, depending on individual pricing strategies. Whatever the case, the weakness was not enough to lift rates from yesterday's recently regained 3.75% level in terms of the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios.
Naturally, the burning question at the moment has to do with the permanence of yesterday's strength. Which moves are real and which moves are corrections? While a case can be made to suit any level of optimism or pessimism, you would have to be extremely pessimistic about the rate outlook to consider this afternoon's trading levels to suggest anything other than solid progress in the battle against February's weakness. In other words, if you look at where we were in the first week of March, and even where we were on Tuesday, today looks great in the bigger picture. In fact, if yesterday never happened, today would have been awesome.
Bottom line, it's too soon to rule out that trends bounced back in our favor so far this month European markets certainly hint at that, and European markets have been a key consideration recently. In terms of the lock/float stance, this means that if you were already inclined to float and understand the risks, then you're not crazy for doing so. But the increased volatility in general means that you can never assume the rates you're looking at right now will be available a few hours from now, which of course, favors a lock bias.
Loan Originator Perspective
"Rates manages to hold on to yesterdays gains which is positive. Also positive is the mortgage bonds ability to hold a key support level. If you have been in the float camp you may want to maintain that stance especially if you have 30 days or more before closing. If you are happy with current rates or are closing soon go ahead and lock." -Manny Gomes, Branch Manager Norcom Mortgage
"Lenders passed along better rate sheets this morning, but they didnt last too long. If you missed the opportunity to lock this morning prior to lenders repricing for the worse, i would recommend that you float over night again. Economic data here continues to disappoint, which will further delay a rate hike from the fed. We are also continuing to receive news regarding Greece exiting the eurozone which will also help rates to hold present levels if not improve further." -Victor Burek, Open Mortgage
"Well March Madness came a day early yesterday in the form of the culmination of the 2 day Federal Reserve meeting and Janet Yellen's and the Board's dovish remarks and statement. And the Madness was excellent for rates. Best levels in weeks and that showed earlier today on rate sheets. We've given some of that back but it was to be expected after such a big move yesterday. I think we're in good shape right now. Once the dust settles from yesterday we'll be able to evaluate the trends direction even better, but with today's damage done but levels still better than where we started yesterday I think we float a bit and see where we go. But as always if you're risk averse and happy with your current offered rate let your loan officer know." -Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC
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 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 was a possibility that the bounce occurred in February, but European bonds got back to the task of improving in March. This has helped calm the domestic bond market's move toward higher rates.
- While more immediate, bigger-picture disaster has been averted, it's still a highly uncertain time for global financial markets. On the one hand, some believe we're in the midst of a race among world central banks to devalue currencies and lower interest rates. Others believe that the global economy is turning a corner and rates will grind higher. That creates a lot of volatility, and volatility is bad for mortgage rates. One result is that they have a slightly harder time keeping pace with movement in Treasuries. That can be good or bad, depending on which way markets are moving. The other result is that there really is no way to be sure that today's rates will be available a few hours from now. They could get better or worse, but the point is that there's more change and movement in the mortgage market so far in 2015.
- 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).