June 2, 2015
Mortgage rates jumped significantly higher today, bringing most lenders to their highest levels of 2015. The most prevalently-quoted conventional 30yr fixed rate for top tier scenarios had briefly made it back to 3.875% at the end of last week. While a few of the most aggressive lenders remain at 3.875% most are now easily back up to 4.0%, and some are already up to 4.125%. Today's rate sheets are fairly similar to the other weakest days of the year on May 13th, May 6th, and March 6th.
The underlying market volatility driving today's move can be considered an opening act for the big show that begins tomorrow and runs through Friday. Unlike those days where we can point to obvious sources for market movement, today's move is most readily explained by the domestic market's relationship with European markets where economic data and headlines concerning a potential Greek debt deal caused European rates to jump. (The more it looks like Greece will get some sort of 'deal,' the higher rates go in the stable countries, and it's those countries that have the most direct effect on US rates).
European influences notwithstanding, financial markets could simply be taking defensive positions ahead of the big ticket events. As we discussed yesterday, it's a high volatility environment. Risk outweighs reward when it comes to locking or floating here.
Loan Originator Perspective
"During all of May we saw us bounce within a range of rates from about 3.75% to 4.00% or so. June is starting us off with a little bit of a scare as we are threatening to move decisively over 4.00%. If markets can get a foothold here and the big economic data coming up the next 3 days doesn't push us over the edge, we may have a decent chance to rally back into the 3's again. We're in high risk territory, however, so your lock/float decisions should be based solely on your tolerance for risk. Risk is higher now which may mean higher reward but it could also mean a lot more pain. Be careful." -Hugh W. Page, Mortgage Banker, SeacoastBank
"Today was a bad day for rates but we’re still in the 2.1 – 2.3 range so it shouldn’t have come as a surprise. We’ve been range bound for what feels like an eternity. I would be willing to wager that the range will be coming to an end soon and that NFP numbers on Friday may be the catalyst. I currently recommend locking as I see little to be gained ahead of Fridays report and floating into NFP is only for those with a very high tolerance for risk." -Jason B. Anker, Vice President- Loan Officer at Salem Five
"Traders appear to be playing it safe ahead of some bid data which will move the market in a big way. It kicks off tomorrow with the ADP report and the Fed's Beige book and finishes Friday with the all important NFP number. We are nearly testing the high end of the rate range and if it does not hold rates could go up in a hurry. On the flip side if it does hold we could see rates decrease. Floating vs Locking is a tough call right now and your risk tolerance should be taken into consideration. If you hate risk LOCK, if you could only tolerate a little bit of risk LOCK. If you like big reward for big risk FLOAT" -Manny Gomes, Branch Manager Norcom Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.00%
- FHA/VA - 3.75
- 15 YEAR FIXED - 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. That said, the upward momentum in rates during this move has subsided to such an extent that we can say markets are considering their next move.
- 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).