July 29, 2015
Mortgage rates had an exceptionally boring day despite the presence of the Fed Announcement. Major communications from the Fed (which include announcements, meeting minutes, and certain speeches) always have the potential to cause significant movement in mortgage rates. Obviously, today's didn't. That's not too surprising considering the statement was very little-changed from the previous version. Moreover, there's broad consensus among market participants that September is the earliest possible month for a Fed hike, and not even the most likely.
That's all well and good, but there are plenty of similar circumstances where the Fed's chosen verbiage nonetheless causes volatility. So today is a victory in that sense, but a loss in the sense that rates didn't resume their previously positive trend. Most lenders are quoting conventional 30yr fixed rates in the 4.0-4.125% range for top tier scenarios. Any movement from yesterday's latest rate sheets is most likely to be seen in the form of slightly higher closing costs.
Yesterday was the first pull-back after a nice run toward the lowest rates of July. It was fairly non-threatening, and it stands to reason that today's lack of significant movement continues to allay fears of a major move higher this week. While that does leave room for those with more risk tolerance to continue floating in the hopes of a broader move lower, things are slightly less encouraging today. Thankfully, those with less risk tolerance are still looking at a good lock opportunity with rates remaining fairly close to July's lows.
Loan Originator Perspective
"Bond markets weakened slightly (again) today as investors digested the Fed's latest economic views. Overall, we're still closer to the bottom of recent ranges than the top, but our inability to rally further may be indicative of higher rates looming. Floating borrowers dodged a bullet today, with little overall market reaction to the Fed Statement, but I wouldn't count on imminent further improvement. I'm back in the "lock sooner rather than later" camp for all but the most aggressive clients." -Ted Rood, Senior Originator
"Bonds had reacted in typical knee jerk fashion following the release of the Fed Statement and ultimately ended near unchanged. The same pricing area which had previously capped prices is now acting a support level. Should it keep holding we could see better rates down the road. Mortgage bonds are however in over bought territory which suggests the odds of rates going up in the near term are higher than going down. That being said use your personal risk/reward tolerances and float or lock according to them." -Manny Gomes, Branch Manager Norcom Mortgage
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).