March 9, 2015
Mortgage rates managed to recover only some of Friday's heavy losses. The most prevalent conventional 30yr rate for top tier scenarios remains at its new perch of 4.0%, though a few lenders remain at 3.875%. That means that most borrowers will see today's improvement in the form of slightly lower closing costs for the same rates quoted on Friday.
The bond market (which includes the mortgage-backed-securities that most directly affect mortgage rates) were completely quiet today. There were no banner events helping rates recover--merely an incidental drift, backing away from Friday's extremes. Some help may have come from strength in overseas bond markets as the European Central Bank officially began its new bond buying campaign today. That said, it still seemed that US bond markets were in their own world, wandering gingerly back from the very scary place they ran to on Friday.
The bigger question, of course, is whether or not today's resilience is here to stay. Unfortunately, we could have asked the same question on several occasion in February, yet rates ultimately continued higher. As such, a mere one-day bounce is far too short (and in this case, far too shallow) to adjust the current game-plan, which is to treat February's bounce as a trend toward higher rates that will continue until it's clearly defeated. It is, by no means, defeated. It hasn't even broken a sweat yet. The natural implication here is to favor locking over floating.
Loan Originator Perspective
"If you floated over the weekend, you were rewarded today with better pricing. The knife was falling on Friday, so it appears the sell off might have been a little over done. Possibly also helping today was the beginning of QE in the Eurozone which is driving European rates lower. The week ahead doesn't have any major market moving data until possible Thursday when Retail Sales is released. Until then, we have the start of a treasury auction cycle. Like Friday, i also think floating overnight might be worth the risk due to lack of economic data and what is happening overseas. Plus, if we can hold onto today's gains, lenders will have more time to be able to pass along the improvements." -Victor Burek, Open Mortgage
"Mortgage Rates improved slightly today after a very rough week last week. I would float cautiously, as I think the beginning of QE for European bonds is going to help prevent our bonds and/or MBS from moving much higher from here. That said, it is only my opinion and there is no denying that the direction over the last month has been toward higher rates. Again, if you float....do so cautiously." -Brent Borcherding, brentborcherding.com
"Rates have been on an unfriendly rise for the better part of 2 months. Last Friday was the fastest rise in over a year and a half. Today’s pause could be a head fake on the way to still higher rates. Rates are still very low from a historical standpoint, but are certainly higher than mid Jan lows. Locking is a safe move since a further rise is as likely as a fall in rates. " -Michael Owens, Vice President of Mortgage Lending, Guaranteed Rate, Inc.
Today's Best-Execution Rates
- 30YR FIXED - 4.0
- FHA/VA - 3.75
- 15 YEAR FIXED - 3.25
- 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's already a possibility that the bounce occurred in February, and we'd need to move back to January levels before ruling that out.
- While there's no guarantee that the current bounce will prove to be "the big one," it makes better sense from a risk/reward standpoint to assume it will be until that can be ruled out. That means favoring locking over floating in most scenarios, except when otherwise noted as a tactical opportunity.
- 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).