July 30, 2015
Mortgage rates were very close to unchanged despite market volatility surrounding the release of today's GDP figures. GDP can occasionally cause a significant response in mortgage rates, and that's especially true of the "advance" release. That's due to the fact that the "advance" release is the first look at GDP for any given quarter. Subsequent releases merely revise the previous quarter's result. Moreover, the Commerce Department implements revisions once a year that greatly affect past GDP reports. So not only are we getting the first look at last quarter's GDP, but also a potentially significant revision to GDP numbers over the past 2+ years.
Today's revisions painted a generally weaker picture of economic growth since 2012. But the most recent quarter showed slightly stronger inflation data. These offset each other to some extent, considering the Fed's rate hike is predicated on inflation rising. But the weaker overall growth was the stronger influence, and that helped rates recover after the data. Most lenders were very close to yesterday's latest levels, with a few slightly higher or lower. The most prevalently-quoted conventional 30yr fixed rates remain in the 4.0-4.125% range for top tier scenarios.
With minimal movement comes minimal change in the lock/float outlook. There continues to be less risk and more opportunity than there had been in June, but not a whole lot of certainty about the next move. It could be the case that we're waiting for next week's Jobs report (an even bigger deal than GDP) and other significant data to set the tone.
Loan Originator Perspective
"Looks like bonds are getting some month end love today. We also had our final auction of the week, and it isn't uncommon to see bonds rally once supply is done. If you have been floating, I think I would float into tomorrow to see if the month end buying of bonds continue. Its always risky to float, so only float if you can afford to be wrong. If you plan to lock today, wait until as late as possible to allow time for your lender to pass along some of the improvements. As of 2pm eastern, a couple lenders have already repriced for the better." -Victor Burek, Churchill 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).