July 9, 2015
Mortgage rates rose fairly quickly today, ending the best 4-day winning streak since early March. On a positive note, this only takes us back in line with Monday's rate offerings, which were the lowest in 3 weeks at the time. In other words, the past 2 days have been erased. For most lenders that means moving back to conventional 30yr fixed rates of 4.125% for top tier scenarios, but several remain at 4.0%. It continues to be the case that rate quotes are more diverse across the lender landscape due to the varying strategies used to address recent market volatility.
That brings us to the next consideration. Volatility is indeed a fixture in 2015 and today's move higher in rates serves as a reminder of how quickly things can (and will) change. In fact, yesterday was the first day where we could have begun to consider that the overall trend toward higher rates in 2015 was shifting. And here we are today looking at the obliteration of the last 2 days of gains. It's for this reason that we've maintained our stance that risk outweighs reward in terms of floating rates. We'd need to see a bigger, more committed move toward lower rates before changing that stance. Yesterday would have been a better starting point for that conversation had the improvements not been driven by uncommon, potentially ephemeral overseas economic risks.
In other words, if rates had been moving steadily lower without needing surprising events like a Chinese stock market crash or Greek Eurozone exit to justify the movement, it would be easier to get excited. For now, the burden of proof remains on rates' desire to push lower. Evidence is insufficient for now.
Loan Originator Perspective
"Well, stock markets and Greek drama giveth, and taketh away, and today was the take away. Bond gave up yesterday's gains and more. We're essentially back in our prior range now, not the end of the world, but we certainly did NOT confirm a lower rate trend. Conservative borrowers should lock early if happy with their pricing. Those willing to roll the dice until this weekend's Greek outcome could profit (or not) by floating." -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.
- 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).