April 6, 2015
Mortgage rates have now given back the ground gained after Friday's big jobs report. To put that in perspective, rates are now modestly higher than the 2-month lows seen on Friday morning. Today's rates are more in line with Thursday's, though most lenders are still in slightly better shape. That said, the most common conventional 30yr rate quote for top tier scenarios is on a fence, and many borrowers may find themselves on a different side today. Whereas Friday saw widespread availability of 3.625%, many borrowers have moved up to 3.75% today, albeit with lower closing costs. Borrowers still seeing the same rates as Friday would be seeing the weakness in the form of higher closing costs.
Motivation for today's market movements was in short supply. It certainly wasn't the kind of day where we have an obvious source of inspiration pushing trading levels in a logical direction. If anything stands out, it was the huge move in the stock market. While stocks and rates are, by no means, required to move in the same direction, that sort of relationship is more and more likely to play out when the moves get exceptionally large. Today's stock market gains were arguably just that. This can result in bonds being sold to buy more stocks. Selling pressure in bonds leads to lower prices and higher rates.
The caveat for this entire discussion is that markets still aren't back to firing on all cylinders after the holiday weekend. We'll get a clearer sense of how the post-jobs-report rate movements will play out starting tomorrow. For now, this bounce back will remain a cause for concern until/unless rates can break back below Friday's levels.
Loan Originator Perspective
"Despite weaker than expected economic data today, bonds were unable to hold onto the gains following the extremely weak payrolls report on Friday. If you missed the opportunity to lock this morning, prior to most lenders repricing for the worse, I would float overnight and see what tomorrow brings." -Victor Burek, Open Mortgage
"Mortgage bonds were unable to hold on to Fridays gains while equity markets erased large pre-market losses and powered much higher. The uptrend in mortgage bond at the moment had not been violated but given the great run they have been in, it makes more sense to lock in now and secure those gains rather than float and risk locking at higher rates or higher closing costs. " -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.625
- FHA/VA - 3.25-3.5
- 15 YEAR FIXED - 3.00
- 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).