July 16, 2015
Mortgage rates are doing a great job of holding their ground after two days of solid improvement. If we look closely enough, today's rate sheets also improved, but by such a small amount that it's just as fair to say rates where 'steady.' As such most lenders continue to quote conventional 30yr fixed rates of 4.125% on top tier scenarios. Some of the more aggressive lenders made it back down to 4.0% over the past 2 days.
In the bigger picture, rates bespeak a certain level of indecision in the global marketplace. Between events in Europe, domestic economic data, and comments from Fed officials, there's more of a balance between positive and negative influences on rates. In fact, even at our worst, we haven't gone any higher than early June levels. Conversely, we still haven't broken meaningfully back into May's levels. Bottom line: rates have shifted from a trend that was clearly pointed higher to a more sideways, indecisive trend. The next big break will be important.
This also means that there's a more balanced outlook between locking and floating. It doesn't mean it's OK to be complacent about watching this range though. Simply put, we can take some solace in the fact that we've weathered some events and some time without making any new highs in over a month. We still need to be watching those highs as a sort of line in the sand. Crossing above it would change the big-picture outlook back to negative.
Loan Originator Perspective
"Our recent rally continued today, as investors pondered the chances of Greece actually fulfilling the terms of their austerity cuts. We're still chasing early July's levels, but at least heading in the right direction. For now, "the range is the range", and we're nearing the low end of it. Can't fault those who choose to lock at the best pricing of the week, nor those who cautiously float hoping for further gains." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.125%%
- 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. July has thus far provided an opportunity to consider such a big-picture correction might be on hold.
- 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).