April 23, 2015
Mortgage rates didn't move much today. While a few lenders were modestly improved, most were unchanged or offering slightly higher rates. This stands in stark contrast to most of today's mortgage rate headlines that suggest rates moved lower. Chalk that up to the widespread dissemination of the highly regarded Primary Mortgage Market Survey from Freddie Mac. Indeed, Freddie's data is exceptionally accurate over time, but it also runs the risk of being a bit stale depending on market movement around the time of their survey period.
Freddie collects data for the Survey from Monday through Wednesday, but most of the responses have been received by Tuesday. This week, that meant that most of the respondents had not yet seen the steep losses on Wednesday. Naturally then, Freddie's numbers suggest rates are lower than they actually are by the time people read about them on Thursday morning. Rates are, in fact, markedly higher than last week's. Whereas most top tier scenarios were being quoted 3.625% for conventional 30yr fixed loans last week, 3.75% is more prevalent today.
The fact that rates didn't build on yesterday's negative momentum is reassuring, but not reassuring enough to assume it isn't a temporary pause in a broader move up and out of our recent narrow range. While that will be easier to decide after next week's Fed Announcement, there is economic data on tap tomorrow that could add to the recent weakness or help rates calm back down. The balance of technical and fundamental data suggests staying a bit defensive here with regard to locking/floating. In other words, it's too soon to rule out the possibility of further weakness.
Loan Originator Perspective
"There is a phrase, "float the highs, lock the lows". Currently, MBS are at the top of the range. Now there is always a chance of the range breaking which would be bad news for consumers floating, but I think it is worth the risk to float overnight. If you wish to remove all risk and lock, I would hold off until as late as possible to see if lenders pass along any price improvements today. At current levels, it isn't really justified, but a reprice for the worse is definitely ruled out." -Victor Burek, Open Mortgage
"Mortgage Rates remained the same today, but the risk of a continued move higher is still the greatest likelihood in my opinion. I personally believe that locking is your best choice. I'm going to be watching rates the next few days, closely, and if we can hold this level or see even a slight move lower...I'll change my sentiment to float. Until then, locking remains the best policy." -Brent Borcherding, brentborcherding.com
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).