March 24, 2015
Mortgage rates fell again today, extending an exceptionally strong 2+ week move back to lower levels after an exceptionally weak 5 week move to 2015 highs. The previous trend topped out after the big jobs report released on March 6th, and we've moved lower or held steady on all but one day since then. For the record, that's 11 out of 12 winning days for rates--not the sort of trend we see too often. It's increasingly likely that the trend will be interrupted (meaning a step back toward higher rates), but it's more difficult to say if that would be a brief correction or the beginning of a broader bounce.
Any lender with a pulse is back down to 3.75% at the very least and many have moved on to 3.625% in terms of the most common conventional 30yr fixed rates. In terms of rate sheet pricing, the gap between 3.75 and 3.625 is much smaller than the next gap lower to 3.5. That means the next .125% lower in rate will require more market improvement than the last .125% (from 3.75 to 3.625). Because of that fact and the technical unlikelihood that an uninterrupted rally continues, borrowers with shorter term time frames would be more justified in considering locking with today's gains. That said, there's still a solid case to be made for borrowers who are inclined to float, who understand the risks, and who are prepared to lock at a loss if rates move against them.
Loan Originator Perspective
"Rates have been on a nice move lately, so if you have been floating you should be seeing much better pricing. If the benchmark 10 year note can hold and close under 1.90, i would float all loans overnight. If the 10 year is unable to hold below 1.90, i would look to lock those loans closing in under 15 days. If you fall into that category, still hold off on locking until later in the day as a couple lenders have repriced for the better already. We should see more price improvements as well." -Victor Burek, Open Mortgage
"We are treading important technical levels that if broken will trigger an enormous favorable improvement in rates and spreads. I favor floating all loans, except those closing within the next 2 weeks." -Constantine Floropoulos, Quontic Bank
"Rates improved again today, although modestly. Equities appear to be challenging resistance and can be in for a breather. This may add some tail winds to the recent bond rally and potentially help them break out of the tight range they have been in the past few sessions. This week is auction week any any large movements tend to take place after the auction results which are released after rate sheets are issued. It makes sense to float day by day and keep an eye on the market following the treasury auctions to determine if locking is warranted. " -Manny Gomes, Branch Manager Norcom Mortgage
""Mortgage Rates improved, again, today. However, after preaching float for some time, I believe now is the time to lock in your gains. Momentum has certainly been moving towards lower rates and it's easy to get caught up in the momentum. However, 1.87 on the 10 year is the bottom of the current range and we'll have to break through this point of long term significance. Can it happen? Absolutely, but the odds are not in our favor and, again, if you've been floating....why not lock in the gains you've experienced?" -Brent Borcherding, brentborcherding.com"
Today's Best-Execution Rates
- 30YR FIXED - 3.625 - 3.75
- FHA/VA - 3.25
- 15 YEAR FIXED - 3.00
- 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).