March 23, 2015
Mortgage rates continued lower today, reaching levels not seen since February 9th. This further solidifies the positive move that followed last week's FOMC Announcement and Press Conference and offers ongoing confirmation that the disconcerting trend toward higher rates that began in February is defeated. While that doesn't necessarily have any implications as to the direction of the next trend, it does mean that we're no longer following the same steep and steady path toward higher rates.
The bond markets that underlie mortgage rates were relatively quiet today despite some volatility in other markets. Typically, the moves in those other markets would result in more weakness for bonds, and thus imply higher rates. But instead, bonds marched to their own beat. The most optimistic way to look at that would be to conclude that bond markets are being resilient in the face of broader volatility, but it's probably fairer to chalk it up to very light trading conditions to start, what is for many, this spring break week.
Most lenders are now offering 3.75% as a conventional 30yr fixed rate for top tier scenarios. Even if you're seeing 3.875%, it might make sense to consider paying more upfront (or taking less of a lender credit) in order to move down to 3.75% as the cost to do so is currently about as low as it gets. At most lenders, that eighth of a point in rate would save enough each month to recoup the additional upfront cost in 4-5 years. There is nothing inherently bad or good for paying more upfront to lower the rate. It's a simple matter of personal preference.
Loan Originator Perspective
"Mortgage backed securities are at their best levels today since early February; however, the rate sheets i have viewed do not appear to include the all the improvements. If you floated over the weekend, i would continue to float into tomorrow. We do get inflation data in the morning, and if it shows weaker inflation than expected, i think rates will improve a little more or at least hold current levels. Even holding at current levels, lenders should be able to pass along better pricing. " -Victor Burek, Open Mortgage
"The momentum is in our favor. At this point I wouldn't expect any large improvements to rates/spreads, but we are buying more time allowing borrowers to lock for longer periods of time on specific rates they are attempting to capture. Time Value! I think this will be the general trend heading into next week's employment data. Inside of 15 should lock, longer time frames can test the waters at these levels." -Constantine Floropoulos, Quontic Bank
"How about that! After a few days of gyrations, rates are now nearly identical to last Wednesday's post Fed statement close. It's quite encouraging that we returned to those levels (best since Feb 2nd). Greek Fiscal Drama continues to simmer, and could help rates if/when it boils over. For now, I'm neutral on lock/float, but will be looking hard at loans submitted to underwriting to see if it's time to take the gains and lock!" -Ted Rood, Senior Originator
"Mortgage Rates continued to improve, slightly, today. There's data throughout the week and I think there is an opportunity to see some continued moves lower, before our next move higher. I'd float, cautiously." -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).