July 14, 2015
Mortgage rates took a break from reacting to headlines coming out of Europe and focused instead on domestic economic data. That turned out to be helpful today as Retail Sales came in much weaker than expected. Downbeat economic data generally helps rates move lower. Today was no exception, but the gains were modest. Most lenders are still quoting conventional 30yr fixed rates of 4.125% on top tier scenarios, though there are a few on either side of that.
Today's Greek headline hiatus isn't the start of a new trend, but rather a calm before the storm. Over the next two days, we'll find out whether or not Greece and other Eurozone parliaments have approved of the bailout terms negotiated this past weekend. From there, quick action would be needed in order to make sure Greece remains solvent between now and the time that the bailout funding would actually kick in. Bottom line, the next few days have more potential volatility, and after that, it will still be a lingering threat for at least a month.
Of course Greece isn't the only thing moving rates around the world, but it's definitely something that market participants are watching and reacting to. Today provided a good example of how domestic economic data can Trump Greece-related considerations. Tomorrow may see an even bigger battle as the expected increase in Greek headlines will face off against Congressional testimony from Fed Chair Yellen. In terms of lock/float strategy, we still haven't seen enough positivity to plan on a bigger-picture shift in the cautious outlook.
Loan Originator Perspective
"If you floated overnight, you should be seeing better pricing today. Weak data here as well as uncertainty over the Greek vote tomorrow has helped rates. If tomorrow's vote is in favor of accepting the bailout terms, I would think rates will give back all the recent gains. If the vote is no, we could see additional gains. Whichever way you think the vote will go should determine whether to lock or float. If you decide to lock, hold off until later in the day to see if lenders pass along any reprices for the better." -Victor Burek, Churchill Mortgage
"We posted small gains today, as actual economic news (weak US retail sales) impacted rates for a change. While Greece's fiscal crisis is purportedly "solved", their legislature must still pass the required reforms by tomorrow, in direct contradiction of the recent popular vote. Whether the reforms will pass, and the societal reaction if they do, is the elephant in the room. I don't think we've seen the last edition of this soap opera just yet. I'm still inclined to lock early; if rates plummet, borrowers always have the potential to renegotiate their lock with most lenders." -Ted Rood, Senior Originator
"Mortgage pricing improved a bit today following a very disappointing retail sales number. This number is certain to be looked at closely by the Feds come their next meeting. In other news tomorrow brings us yet another Greek vote. Last time they voted the bond market caught a bit of a rally but that does not mean it will happen again. Still to much risk to consider floating. " -Manny Gomes, Branch Manager Norcom Mortgage
"Mortgage Rates improved today after reaching near the top of the recent range yesterday. Tomorrow we have a Greece vote and at that point, anything can happen, but my opinion is that worse case is we remain range bound. Best case could be that we see a rally through the bottom of the range. There is always a risk in floating, but I currently believe it is one worth taking. However, always float cautiously and be prepared to lock." -Brent Borcherding, brentborcherding.com
Today's Best-Execution Rates
- 30YR FIXED - 4.125%-4.25%
- FHA/VA - 3.75-4.0
- 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).