March 20, 2015
Mortgage rates moved modestly lower on average today after doing an admirable job of holding their ground amid weaker market conditions yesterday. That weakness was largely the result of a technical correction to the immense strength seen after Wednesday's Fed Announcement and Press Conference. The following two days have essentially legitimized that strength as something other than a temporary knee jerk reaction.
While that legitimacy doesn't necessarily guarantee rates move lower from here, it guarantees that lower rates remain possible. While it's true that rates can always move lower, that wouldn't be as likely if the past two days saw a quick move back to pre-FOMC levels.
Most lenders are now quoting a conventional 30yr fixed rate of 3.75% for top tier scenarios. There's more consensus on that one rate than normal. Many lenders that had been at 3.875% are just barely into the 3.75% territory after this week's gains, but underlying market levels are quite strong enough and haven't been maintained long enough for too many lenders to make the foray down to 3.625%.
Loan Originator Perspective
"Now that we've dodged the bullet of a higher than likely interest rate increase on the near term (for now), mortgage markets seem to have breathed a sigh of relief and pricing remains attractive with risks abating somewhat. It feels like rates will probably stay within a small range until we get some further impetus that will take us in a defined direction so floating longer term locks for now seems safe. I would still be less picky in the short term (15 days or less) and take any day with improvements as a chance to lock in. As always, stay close to your LO and market news to be ready to move if need be." -Hugh W. Page, Mortgage Banker, Seacoast Bank
"Thanks to yesterday's late day weakness, lender pricing was quite conservative this morning despite bonds recouping all of their losses. As of 1pm eastern, not a single lender has been reported to MBS live as repricing for the better. Even if your lender reprices for the better later today, i would still float over the weekend. If lenders do improve pricing, they will hold back quite a bit with today being a Friday." -Victor Burek, Open Mortgage
"We end the week in a very favorable position. For those brave enough to float into FOMC, you have chosen wisely and bought yourself time and a better rate. I favor floating into Monday as time is on our side. Next major market moving event comes April 3rd, with relevant data & auctions in-between but not remotely as important as FOMC or NFP. Time is on our side." -Constantine Floropoulos, Quontic Bank
"Rates improved slightly today, which is an encouraging sign after yesterday's losses. Staying below 1.95% on treasury yields (1.93% mid day) is also good to see. Next week we'll get inflation data, and the longer inflation is tame, the better rates should do. I'm 50/50 float now, locking some loans at origination, but floating a few for risk tolerant clients who want to do so." -Ted Rood, Senior Originator
"Mortgage Rates have improved for 2 days in a row and lenders have not caught up with market improvements, which means even if we hold these MBS levels rates could improve in the coming days. For that very reason, I say float as the opportunity for improved rates into next week is very real." -Brent Borcherding, brentborcherding.com
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).