May 26, 2015
Mortgage rates were just slightly lower in most cases today. Last Friday, rates did a bit better than the underlying market weakness would have suggested, and now today, they've done a bit worse than the underlying strength would suggest, leaving them right about where they should be if the past two business days never happened. The most prevalently-quoted conventional 30yr fixed rate remains 4.0% with some lenders continuing to offer 3.875%. In most cases, the differences in rates over the past few days will only be seen in the form of varying closing costs as opposed to changes in the actual contract rate.
Despite the gentle movement since Thursday, the past few weeks have seen more than their fair share of volatility. In terms of the bigger picture, rates have made several attempts to move lower after spiking in early May, but each time they've quickly run out momentum. Underlying market conditions are once again signaling a bounce attempt is underway, but it's not safe to plan on the good times continuing until/unless we see several days in the near future with even stronger improvements.
Loan Originator Perspective
"We are enjoying a nice start to the last week of a miserable month for mortgage rates. Currently, the benchmark 10 year note is at 2.14. Twice this month, this level was tested and held pushing rates higher. Is the third time the charm? I think it might be worth the risk to see if it is. It is month end which is usually supportive of bonds and the potential default of Greece is picking up pace in the news. If you do wish to lock, wait until lock cut off to allow your lender time to reprice for the better." -Victor Burek, Open Mortgage
"The good news is that bond markets improved today, and we're reasonably close to levels last seen May 15th. The bad news is that we're still almost a full 100 bps (1% to loan pricing) under late April's levels. It's great to regain some of the lost ground, but I haven't seen enough to call this a rally yet. I still contend we need significant news to jolt rates down much. I'm advising all but the most aggressive clients to lock earlier in the loan process; we can always renegotiate if rates take a big drop during the loan process." -Ted Rood, Senior Originator
"Mortgage bonds and Mortgage rates appear to be setting up for a big move and for the first time in awhile it appears Bulls may lead the charge. Of course it will take a few more days to have more certainty but i'm liking the odds enough to start floating. " -Manny Gomes, Branch Manager Norcom Mortgage
"Mortgage rates improved today and which is good timing as I started to suggest floating at the end of last week. I still see potential value in floating day to day, right now, after a long run of increasing rates. That said, until we see more momentum there still remains risk to the upside. Float, but float cautiosuly and be ready to lock." - Brent Borcherding, brentborcherding.com
Today's Best-Execution Rates
- 30YR FIXED - 4.00%
- FHA/VA - 3.75
- 15 YEAR FIXED - 3.125-3.25
- 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.
- 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.
- 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. Those risks are being compounded by speculation about the Federal Reserve raising rates by the end of 2015.
- We're in the middle of the 2nd big, ugly bounce so far this year and once again forced to confront the possibility that this will be a big-picture, long-lasting correction. Until such a thing can be ruled out, Locking makes far more sense.
- 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).