July 24, 2015
Mortgage rates barely budged for an impressive 7th straight day. Refreshingly, all but one of those days have seen rates budge slightly lower. In fact, today's budging was just enough to get the average rate to the lowest levels seen in July. (To emphasize just how small the movements have been, some lenders moved to slightly higher rates today.) The most prevalently quoted conventional 30yr fixed rates remain in a range between 4.0 and 4.125% for top tier scenarios, though some of the most aggressive lenders are now venturing into the "high 3's."
Part of the reason for this week's extreme level of drowsiness in rates is that it was an "in between" week in terms of events that matter to the bond markets (which drive rates). Stocks were center-stage amid this quarter's biggest batch of earnings, European influences are on hold at the moment, and economic data (which bond markets typically tune in to) was very light. Combine that with an upcoming week that has a lot more data and a policy announcement from the Fed and this was a fairly ideal week for bond markets (and thus "rates") to take a nap.
Naturally, that implies that next week won't be quite so soporific. From a strategy standpoint, it's still the case that recent strength (read: lower rates) has helped to balance the longer-term outlook. Floating is not without its risks though. Any time bond markets string together as many winning days as they have over the past 2 weeks (8 out of the past 9 days), there's a good risk of a pull-back regardless of the input from economic data and other news. If that push back is tepid and shallow, it would be our favorite kind of rising-rate day as it would suggest a broad base of support for further improvements.
Loan Originator Perspective
"What a nice week for bonds and borrowers! 10 year treasuries' yield went from 2.36% to 2.26, while MBS prices improved less, but still up about .5% from Tuesday's lows. Stock market lethargy may be helping some, but whatever the motivation, we'll take the gains. It's very tempting to lock in current pricing, especially for borrowers within 30 days of closing. Those with longer timeframes may opt to float, but need a defined plan with their lender, rather than a "let's wait and see what happens next week" approach. Have a great weekend!" -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 4.0-4.125%
- 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. The next four bullet points are currently more of a reflection about the first half of the year. July still has a chance to be the month where rates held their ground against 2015's initial push higher.
- 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 (for the better), 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).