June 5, 2015
Mortgage rates are officially having a bad June. It's not quite as bad as February, but February began with rates very close to all-time lows, and served as more of a correction to a previously positive trend. June, on the other hand, follows 2 straight months of higher, more volatile rates. Without a shadow of a doubt, it's on pace to be the worst month we've seen in years. Of course that assumes the pace continues to follow the example set by the first 5 days, and that is highly unlikely. Still, if the month were to end right now, we'd have to go all the way back to June 2013 in the throes of the taper tantrum to find anything worse.
And yet, rates are just barely up into the 4's. Quite a few lenders moved up to quoting 4.25% today for conventional 30yr fixed loans, but at least an equal amount remain at 4.125%. Historically, these rates aren't that bad, depending upon your age and memory. But I'm not a big fan of those "perspective" reminders. If I'm a borrower who had began shopping for a home or considering refinancing a few weeks ago when rates were in the 3's, I couldn't care less that you remember refinancing down from 18% to 13% in the early 80's.
Present day reality is just that. And presently, we must continue to be concerned that the rates in play at the beginning of our potential buying/refinancing process could move painfully higher at any point during that process. We have to defend against the possibility that rates have made a long term low in early 2015 and will continue to be volatile at the very least, if not outright higher. It's not an environment where floating makes much sense for all but the most risk-tolerant gamblers.
Loan Originator Perspective
"A very solid payrolls report pushed rates higher again today. All the damage was done prior to rate sheets which were considerably worse than yesterday. If you floated into today, i would continue to float until Monday. We have some support just over head on the 10 year treasury note, and rate sheets are worse than the price drop justifies which is not surprising on a Friday on the day with a pretty big move lower. " -Victor Burek, Open Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 4.125%-4.25%
- 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).