April 2, 2015
Mortgage rates bounce higher today on average. Some lenders remained close to unchanged, but they generally were the same lenders that hadn't improved as much by the end of the day yesterday. In the bigger picture, today's weakness in rates is a minor correction in a longer-term trend toward lower rates. Case in point, yesterday afternoon's rates were near 2-month lows, and with the exception of several weeks earlier this year, current rates are the lowest in nearly 2 years.
Some lenders are still offering conventional 30yr fixed rates of 3.625% on top tier scenarios, but the average lender is back to 3.75% today.
Tomorrow brings the exceptionally important Employment Situation Report (aka "the jobs report," nonfarm payrolls, or simply, "NFP"). This is, by far and away, the most significant piece of economic data that's released each month and is always capable of causing significant movement in rates. With much of the recent economic data being weaker than expected, traders are probably erring on the site of a weak jobs report tomorrow. That sets the stage for another quick move higher if the data happens to defy expectations.
The risks aren't all on the downside though. If the data is weaker than expected, rates could break through the lows seen early last week. Some would take that as a cue for additional momentum. There's probably a higher bar for this positive scenario. So, while it's on the table as a possibility, the risks associated with floating outweigh the reward.
Loan Originator Perspective
"Today is your last chance to lock before we get the non farm payrolls report bright and early tomorrow morning. Could go either way. At this point ask yourself what would hurt you more. Locking today and pricing improves, or floating and pricing worsens. The safe move is to lock." -Victor Burek, Open Mortgage
"Rates were mostly unchanged today, despite some non bond-friendly economic news. That itself is encouraging, at least the MBS market doesn't seem motivated to sell off (meaning higher rates). HOWEVER, tomorrow's NFP March jobs report is a big wildcard. February's robust report sent rates up for a couple of weeks. My rate sheets improved today, compared with yesterday's close. I don't see the need to risk great pricing on a bet the jobs' report disappoints. My loans are all locked, and clients will sleep soundly tonight!" -Ted Rood, Senior Originator
"Rates are more or less in line with yesterday. Today will be your last chance to lock ahead of the jobs report. Given thr fact we are not to far off the low for rates this year it would take a large miss to drive rates lower. This makes locking today a better option from a risk/reward standpoint. Floating into tomorrow is basically gamble which may or may not payoff " -Manny Gomes, Branch Manager Norcom Mortgage
"Mortgage rates worsened today, and I hope you followed yesterday's advice and locked. Tomorrow is the Non Farms Payroll report (NFP) and it is the largest market mover every month. Floating into NFP is a very large gamble and with rates at/near 2 year lows it makes that gamble even larger. Even if you missed yesterday's lock opportunity, I still believe today is a locking opportunity. If rates improve over the next month, there will be ample time to negotiate a float down but if they rise...you'll have missed the 2 year lows. Lock and move on." -Brent Borcherding, brentborcherding.com
"Interest rates are very attractive historically and for most clients, closing inside of 45 days, I've recommending locking. We discuss risk versus reward of floating over such an important release as tomorrow's BLS jobs report, and most clients want to take risk off the table. Even with a weak jobs report, I tend to doubt that much rate improvement will occur anyway. On the other hand, a jobs "beat" and we worsen quickly and perhaps multiple times on Friday." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
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.
- 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).