April 15, 2015
Mortgage rates were unchanged to slightly higher today, though that depends largely on the individual strategies of the lender in question. Some lenders recalled rate sheets yesterday and raised rates due to afternoon market weakness. Those lenders stood a better chance of being unchanged today. Lenders who didn't reprice yesterday never saw the underlying market for mortgage-backed-securities make it back to the same levels from yesterday morning. As such, they would be slightly weaker today (higher in rate or fees). Either way, we're talking about fine-tuning adjustments rather than big-picture shifts. Conventional 30yr fixed rate quotes of 3.625% are still most prevalent for top tier scenarios, followed closely by 3.75%.
Markets have been doing a good job of reacting to economic data so far this week, and that's been positive for rates. It's somewhat disconcerting then, that both Treasuries and mortgage-backed-securities (which dictate mortgage rates) seem to be having a hard time getting back through their best recent levels. For mortgage rates, this equates to widespread availability of 3.625% for top tier borrowers. We're not quite there, and we were just barely getting their after the jobs report on April 3rd.
The resistance is even clearer (and easier to follow from home) with respect to 10yr Treasury yields. There, a band of yields between 1.84 and 1.86 has blocked all progress since early February. This zone also has a history of this sort of behavior stretching back to 2011. It's not that rates can't break through, just that they're more likely to bounce, historically. The trade-off is that if rates DO manage to break through these levels, it would be an important, positive commentary on the underlying momentum. Until/unless that happens, it makes more sense to defend against another bounce. That means favor locking for now.
Loan Originator Perspective
"Weaker than expected data enabled mortgage bonds to recover yesterday afternoon's losses. Bonds however were not able to make new highs and it is looking more and more to me that rates may be bottoming out in the near term. I am favoring a locking stance on all loans until the technical picture tells me otherwise. " -Manny Gomes, Branch Manager Norcom Mortgage
"Much like yesterday, the benchmark 10 year note tried to move lower following weak economic data but ran into the same resistance that has held for the last few months. Since we are at the bottom of our range, I will continue to favor locking all loans within 30 days of closing. " -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.625-3.75%
- 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.
- It's 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).