July 15, 2015
Mortgage rates once again focused more on domestic issues today as Greece had not yet voted to approve its bailout by the time US markets closed. While the results of that vote could cause volatility tomorrow, the absence of those results had little impact today. Instead, the financial markets that underlie mortgage rates were more interested in Fed Chair Yellen's semi annual congressional testimony.
As a part of the testimony, Yellen's prepared remarks were released first thing in the morning, before lenders come out with their first rate sheets of the day. The interpretation was slightly negative for bond markets, implying slightly higher rates. Indeed, most lenders subsequently began the day at slightly higher rates vs yesterday.
But as the day wore on, and as Yellen's actual conversation with the House Financial Services Committee was far less threatening than her prepared remarks, bond markets began to improve. This opened the door for lenders to adjust rate sheets in a friendly direction in the afternoon, and most did! The net effect isn't all that impressive, but it was enough to leave the average lender in better territory than yesterday. Most continue to quote conventional 30yr fixed rates of 4.125% on top tier scenarios, but some of the more aggressive lenders are back to 4.0%.
Loan Originator Perspective
"Interesting move today with rates. We had Janet Yellen testimony where she reiterated that she wants to hike rates this year. In addition, the economic data was better than expected showing the economy is still improving. This should be bad news, yet rates are rallying today. Maybe the uncertainty that Greece will vote yes on bailout program is weighing on investors. With today's gains, I would think it is wise to lock in. As of 2pm eastern, many lenders have repriced for the better but more are likely to come. So hold off and lock in later in the day. " -Victor Burek, Churchill Mortgage
"Rates rallied today, while still remaining within recent ranges. We're approaching levels last seen July 9th, which is encouraging. The big question is whether we can hold, and add to, these gains. Floating borrowers who are ready to lock will see good pricing this afternoon. Those who remain floating need to carefully consider their expectations, and risk tolerance." -Ted Rood, Senior Originator
"Today was quite a busy day with Economic data, Janet Yellen addressing the house and oh yea Greece is still in the picture. All of this led to a slight gain in mortgage bonds which I take as being positive. Looking at the charts the uptrend in treasury yields may look to possibly end sometime in the future should 2.5% continue to act a lid. This could be positive for rates longer term and something to consider if you have well over 30 days before closing." -Manny Gomes, Branch Manager Norcom Mortgage
"Mortgage Rates improved again today and my last two days of reference to the range, appear to have provided decent guidance. I've felt pretty good that the high side of the last 6 weeks plus range is strong, and it appears that we did in fact bounce from near the top. At this point, specifically considering the global events and the fact we're in the middle of the range moving lower...I think floating may be rewarded. " -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).