April 16, 2015
Mortgage rates were unchanged again today, continuing a trend of minimal movement that has been intact for all but one day since Monday April 6th. Rates aren't much different today than they were then, but being sideways at these levels is certainly not a bad thing when more than a few lenders are offering 30yr fixed rates of 3.625% on top-tier scenarios.
It will be nearly two full weeks until we get any data that's significant enough to justify a big move in rates. Between now and then, it's hard to see where motivation will come from, as markets are telling us that weakness in the moderately important economic reports is not enough on its own. Today saw volatile underlying market conditions that ended up 'canceling themselves out' for lack of a better term. Bonds were weaker mid-morning, and erased the weakness in the afternoon. Most lenders didn't change rates during the day.
The biggest risk is that these levels represent some sort of perfect storm of resistance (a "floor" of sorts, blocking rates from further progress). We won't be able to rule that out unless we break lower fairly soon. The longer that continues to elude us, the more it makes sense to favor locking. Rates could move quite a bit higher without technically exiting the long-term trend lower. Think of this like rates descending in a tunnel since the beginning of 2014. Recently, like most times during that descent, we've been nearer the floor of the tunnel. But every so often, we'll bounce up and hit our heads on the roof of the tunnel. If the next few weeks are to be one of those times, it seems like we'll know soon.
Loan Originator Perspective
"Mortgage bond prices have been consolidating and are stuck in a tight trading range. Normally this is what happens before a large move in pricing. The tricky part is we are not in an up or down trend so it is difficult to forecast which direction the move has the greater chance of heading in. Times like this it is wise to lock loans and eliminate market risk. Of course when the break occurs we will know which stance to take from that point forward. " -Manny Gomes, Branch Manager Norcom Mortgage
"With the benchmark 10 year treasury note unable to move lower through resistance, i will continue to favor locking. At this point, there is more to risk then to gain by floating loans." -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).