April 20, 2015
Mortgage rates figure if they can't be pushing down to new record lows, they might as well pass the time by shooting for different records. This time around, it's the record for FLATNESS! We calculate an average 30yr fixed conventional rate every day based on the sweet-spots on multiple lender rate sheets. This gives us an 'effective rate' to track that typically falls between the two most common rate quotes in the market. For instance, the current computed rate is 3.66% and the two most common quotes are 3.625% and 3.75%. On 9 out of the past 10 days, that effective rate has moved an average of 0.01% per day. In terms of day-to-day rate movement over time, this is about as flat as it gets!
There's never any guarantee that the flatness will continue, but we can easily observe a lack of conviction in the financial markets that drive rates. Mortgage lenders have even become less apt to change rates in the middle of the day on the occasions where market movements might have justified it (based on past precedent). In general, there's a pervasive air of dispassionate complacency. It would be easy to assume that the gorilla will reach the room when the Fed Announcement comes out next Wednesday, but then again, markets might be let down by a lack of 'clues' regarding the Fed's rate hike timeline. Beyond that, the Fed's rate hike timeline may not even be the thing that provides the next major motivation for longer-term rates like mortgages. Bottom line: we're flying blind at a non-threatening cruising altitude. The first clear change in altitude will be an important indication of what's to come.
Loan Originator Perspective
"Mortgage Rates have remained the same, again, today. I strongly favor locking at what are nearly the best levels of 2015. Since we are at/near the bottom of the range, the highest likelihood is rates worsening. Too much to lose and very little to gain by floating." -Brent Borcherding, brentborcherding.com
"Rates continue to bounce off of resistance that has held since early February. With lender rate sheets pretty close to the best we have seen since then, i would favor locking all loans closing within 15 days. Longer term closings should also consider locking, as a move lower in rate is gonna take some major news, but i wouldnt be against floating longer term closings until within 15 days to lock at the best pricing offered by lenders." -Victor Burek, Open Mortgage
"Another day in Stagnant Rate Land today! The good news is that rates have no apparent inclination to rise; the bad news is that it will take a serious jolt of some kind for them to drop. In situations like this, I see only marginal upside to floating, and will recommend new clients lock, provided they're happy with their current pricing and lender credits." -Ted Rood, Senior Originator
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).