April 30, 2015
Mortgage rates held their ground today, and in some cases, managed to improve after yesterday's rout. This result was far from guaranteed during the morning hours though. Stronger economic data caused bond markets to weaken significantly, putting upward pressure on the day's first rate sheets. Later in the day, traders set about making their end-of-month trades, which often must be made without regard for economic data or investment strategy.
In today's case, those month-end trades were a big benefit for the bond markets that underlie mortgage rates. Most lenders were able to reissue improved rate sheets by the end of the day, though we've only just barely begun erasing yesterdays losses. Many lenders are still offering conventional 30yr fixed rates of 3.875% on top tier scenarios. The more aggressive lenders remained at 3.75%.
From a lock/float standpoint, there's still a lot of negative momentum in bond markets. To shift our stance away from a lock bias would be to attempt to catch the proverbial falling knife. That doesn't tend to make a lot of sense on the last day of any given month as those aforementioned "month-end" bond trades can distort reality .
Loan Originator Perspective
"Sometimes the trend is simply not your friend and that is the case for now. Until I am otherwise convinced this trend will not continue I would be locking up everything right now. Nothing ever goes in one direction forever but for now it's wise to play defense." -Hugh W. Page, Mortgage Banker, SeacoastBank
"I've been flat out recommending locking for several weeks. Except for loans outside of 60 days or loans with moving pieces, my clients are all locked up, including a jumbo loan application this morning. There's too much unease in the bond markets for my comfort level." -Brent Borcherding, brentborcherding.com
"It is still to soon to see what direction rates will now be headed in. Locking is the prudent things to do especially if your closing is weeks away. If you have 30 days or more waiting to see how things shake out is not a bad idea." -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.75%-3.875%
- FHA/VA - 3.375-3.5
- 15 YEAR FIXED - 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).