June 22, 2015
Mortgage rates had been walking a slow, steady path of improvement since hitting 8 month highs on June 10th. From then on, there were only 2 days where rates did NOT improve. As of last Friday, the average conventional 30yr fixed rate quote for top tier scenarios was as close to 4% as it has been since the beginning of the month. Today's spike brings the average solidly back in favor of 4.125%.
There are several ways to view and understand this weakness. First of all, 2015 is simply a more volatile time for interest rates, and that's not expected to change any time soon. More specifically, Friday marked 3-week lows. That's a pretty good run for a high-volatility environment that's mainly seen rising rates for 2 months, and it's the reason I noted on Friday that rates were still technically in an "uptrend" in 2015 despite recent improvements. Today served as a painful reminder of that.
Loan Originator Perspective
"The headlines this morning indicate that some sort of deal has been worked out between Greece and their creditors. As always, the devil is in the details. We still haven't seen all the terms and it still must be ratified by each countries governments, so there is still a ways to go. However, as I stated before, the ECB and Greece have been very good at kicking the can and i suspect that will find a way to buy a few more months before the inevitable. Unless we get some news of the deal being unapprovable, I suspect rates will continue to be pressured higher. So, floating continues to be very dangerous as the markets are moving on headlines and not data. You always know when a data report will hit the news wires, but you never know when a tape bomb might hit." -Victor Burek, Open Mortgage
"Must be a Monday, as rates rose dramatically amid more rumored progress on Greece's fiscal woes. Last week's gains are going/gone, and as of early afternoon, 12 lenders worsened their rates, with more on the way. Floating borrowers who hoped for a return to sub 4% rates need to take a hard look at their goals. I'm back in "lock early" mode, it appears the trend is NOT our friend." -Ted Rood, Senior Originator
"Days like today are beyond nauseating for everyone shopping for a mortgage and for all professionals who work on obtaining the loans for consumers. Rates rising are not the problem, but rather the aggressive volatility. What's disturbing is that today's move is so connected to news out of Europe that Greece is making progress towards paying its obligations. It's comical in a sense as we have seen this act play out way too many times in the last 5 years.....with the last 6 months looking more like Seinfled reruns. Way too risky to give guidance outside of locking, but I would say that after today's sell-off, I'm hoping to see at least some relief." -Constantine Floropoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 4.125%
- FHA/VA - 3.75
- 15 YEAR FIXED - 3.25-3.375%
- 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. There is much debate over whether or not the global economy is turning a corner, thus justifying a widespread move to higher rates. That's made 2015 significantly more volatile than 2014 for markets. This means lender rate sheets may change appreciably from day to day, and sometimes even several times in the same day.
- Bottom line: European Quantitative Easing helped push global rates to all-time lows in April. Now, the big risk for mortgage rate watchers is that we might have turned a long term corner. That risk is being compounded by speculation about the Federal Reserve raising rates by the end of 2015.
- May and June have amounted to the 2nd major move higher bounce so far this year. Every time this happens, we have to consider 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).