March 25, 2015
Mortgage rates finally moved noticeably higher today, something they haven't done on 11 out of the last 12 days. Yesterday, I pointed out that such a winning streak is not the sort of thing we see too often, and that a step back toward higher rates was increasingly likely. This, then, is that step, but the same difficult question remains. Will it simply be a brief correction or the beginning of a broader bounce?
As of this evening, the magnitude of the weakness and the volume behind it are just barely getting up to levels where they shouldn't be disregarded as a mere course correction. That's still the least defensible of the two options though. Reason being: even after today's losses, the recent downtrend leading back from 2015's highest rates in early March remains intact. It would take another similar day of weakness to call that trend into question.
That's not an endorsement or suggestion to float though! It simply means there's still a chance that it will be an isolated pull-back though it's not safe to plan on that. As such, a more defensive stance makes sense here with respect to locking/floating. Rates at many lenders aren't any worse than Monday's levels. 3.75% is still widely available as a conventional 30yr fixed rate for top tier scenarios. Some lenders are still offering 3.625%.
Loan Originator Perspective
"Today’s move in rates shows why locking is always the safe move even if you think rates will go lower. We could see a reversal and rates could go down. However, confirmation of technical levels broken yesterday could not hold today. We’ve seen 2 weeks of gains and locking up now makes sense to me." -Michael Owens, VP of Mortgage Lending, Guaranteed Rate
"Mortgage Rates worsened today, so I hope you were able to lock in your gains. We made an attempt to break lower and that has been rejected. I still think locking is the best decision, as rates could easily worsen before we see any further improvement." -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).