April 22, 2015
Mortgage rates finally broke out of a persistent sideways grind today. Unfortunately, rates moved higher at a fairly brisk pace. Whereas most lenders were offering conventional 30yr fixed rates of 3.625% on top tier scenarios yesterday, 3.75% is more prevalent today. Borrowers who didn't see an increase in the contract rate will instead see the changes in the form of higher upfront costs.
While it may seem a bit abrupt, days like today are very much part of the market's playbook. When trading levels (which generally dictate the movement on lenders' rate sheets) hold as steady as they had been for as long as they had been, the first move away is almost always faster than average. Today was no exception, and it's the reason for yesterday's advice:
"it's worth considering that rates are experiencing this flatness right in line with the best levels in more than 2 months. Historically, these have been great opportunities to lock"
That's all well and good, but it's precious little consolation if you haven't yet locked. In that case, it's best to assume this weakness can continue until/unless that's ruled out, though markets may hesitate to take the move much farther ahead of next week's Fed Announcement.
Loan Originator Perspective
"The range that has held mortgage rates fairly steady, finally broke today to the bad side. With the Fed on deck next week, probably wise to go ahead and lock in today. If your lender has already repriced for the worse, you might should float over night and lock tomorrow. Lenders typically take away more than the price drop of MBS justifies." -Victor Burek, Open Mortgage
"Mortgage Rates are worse today. My suggestion has been to lock as the risk of rising rates has been imminent. I would still suggest locking as rates are likely to worsen before they improve, if they improve any time soon. LOCK!" -Brent Borcherding, brentborcherding.com
""I must break you". Not only a quote from Ivan Drago, 10 year yields broke one layer of support today. We can hope for a Rocky like comeback, but it is probably best to play defense and lock and secure your rate. There is more to risk than gain right now by floating." -Ira Selwin, VP of Capital Markets, US Mortgage Corporation
"I've been in a locking mode lately as pricing has been stagnant, and that came in handy as mortgage rates moved higher today. While the move wasn't overly large, it took us outside our prior "holding in place" range, which merits caution. When rates break out (higher or lower) after a prolonged period of stability, the changes can be dramatic. Today's action doesn't necessarily indicate higher rates looming on the horizon, but it certainly could turn into that. For now, I'll continue my locking bias unless a client insists on floating." -Ted Rood, Senior Originator
"Mortgage rates took it on the chin today heading a little higher after the release of some positive housing sales numbers this morning. This move broke a sideways trend we've been in for a little while. A defensive posture is warranted here as a continuation of this trend tomorrow could mean the bleeding hasn't stopped yet. I would certainly be locking in my rate if I were closing within the next 15 days and probably even at 30 days. Locking in anything longer than that is certainly not a bad move but waiting for direction tomorrow before deciding may not hurt you either." -Hugh W. Page, Mortgage Banker, SeacoastBank
"Rates moved higher today as bonds sold off and equities rallied. Is this the start of a break out towards higher rates or a temporary move higher within a longer term down ward move. It may still be a little to early to tell but the risks of floating are increasing and locking should be strongly considered for those who are risk adverse." -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.75%
- FHA/VA - 3.375-3.5
- 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 helped calm the domestic bond market's move toward higher rates. April's weak employment report helped solidify it.
- 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 had been creating a lot of volatility, which made for uncertain fluctuations from day to day. But those periods of volatility have been interspersed by utter indecision where rates are effectively drifting sideways with no conviction and no desire to get off the fence. We have yet to see a truly big/scary move higher after 2015's first (and so far "only") big push toward higher rates that ended at the beginning of March. We've been sideways right in between the highs and lows ever since.
- 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).