May 8, 2015
Mortgage rates had been under heavy attack for several weeks before finally striking back yesterday. The counterattack could only go so far with today's important Employment Situation Report looming. Fortunately, the results were not strong enough to send rates back up. The result is a continuation of yesterday's bounce, bringing rates to their best levels of the week. The most prevalently-quoted conventional 30yr fixed rate is once-again 3.875% with a few lenders on either side of that (3.75% or 4.0%).
While it's a very welcome change of pace compared to recent weeks, the gains over the past two days only undo a fraction of the damage. US markets are clearly unwilling to make any big commitments until they get input from European markets, which have been chiefly responsible for current volatility. In other words, there is still plenty of reason to be tentative about prospects for additional improvement. Floating is much less risky than it was earlier this week, but perhaps still a bigger risk than it makes sense for conservative borrowers to take just yet.
Loan Originator Perspective
"Floaters rejoice...nice rally today making it 2 consecutive days in a row of improved pricing following the beat down of the last couple weeks. Lender pricing tends to to move higher much faster than it moves lower. If you floated into today's report, i would float to Monday to allow time for lenders to pass along the improvements and also to see if the improvements can continue. " -Victor Burek, Open Mortgage
"Mortgage rates had been trending up virtually all week so a lackluster Jobs Report this morning provided a short term reason to reverse the trend in the short term. We still have some uncertainty over the medium and longer term timing of an inevitable Fed rate increase. Given this, my recommendation to clients is a bias to lock in closings within the next 2 weeks taking advantage of this recent gain and cautiously float longer term closings. As always, your risk tolerance and ability to weather any unexpected volatility should guide your decision making." -Hugh W. Page, Mortgage Banker, SeacoastBank
Today's Best-Execution Rates
- 30YR FIXED - 3.875%
- 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. 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.
- Unfortunately, this didn't result in a strong move past the year's previous lows. In fact, rates at home and abroad hit a floor of sorts and flat-lined. They've begun moving higher at a quick pace, and we're once again forced to confront the possibility that this will be a bigger, longer-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).