September 22, 2015
Mortgage rates got back on track today after giving up a fair amount of last week's gains yesterday. Most lenders are very close to Friday afternoon's levels, which were among the best in over 4 months. Support came from a flight to safety in global financial markets. This generally entails stock market weakness and bond market strength. Bond markets include the mortgage-backed-securities (MBS) that dictate mortgage rates. When MBS are stronger, rates move lower.
Most lenders continue to operate in a range of 3.875%-4.0% for conventional 30yr fixed rate quotes, though some of the more aggressive lenders are moving down to 3.75%.
Today's improvements rekindle some hope that rates will begin to trend lower after remaining largely sideways in the several weeks leading up to the Fed Announcement. That said, markets seem to be doing their best to avoid committing to any new trend just yet. Risks associated with floating are still lower than they were before the Fed, but it's never a bad idea to lock when rates are this close to their 4-month lows.
Loan Originator Perspective
"All the losses from yesterday have been recouped today. As of 2pm, some lenders have passed along price improvements but we should be seeing many more. With these gains holding going into the close, I would float all loans overnight and evaluate pricing in the morning." -Victor Burek, Churchill Mortgage
"Bonds bounced back today, as rates returned to Thursday's post Fed Statement levels. A move to lower rates is always welcome, but I'll be more enthused if we can carry it past our prior range, rather than just bouncing up/down within it. The global equity sell-off continues, which should support lower rates as well. Will our rally continue is the $20 question, but at least we are working in the right direction at the moment. Can't blame folks who choose to either lock or float today, it's a coin flip imho." -Ted Rood, Senior Originator
"Mortgage bonds bounced back today as Global Growth concerns are back in the forefront. If we see another positive day for bonds tomorrow this could be the start of something great for rates. I say float into tomorrow." -Manny Gomes, Branch Manager Norcom Mortgage
"A very well received day for interest rates following yesterday's punishment. We still need a little more to be convinced, therefore for the time being locking into today's rally is my strategy for loans closing within 15-20 days. Too many variables and volatility affecting day to day markets...." -Constantine Floropoulos, Quontic Bank
Today's Best-Execution Rates
- 30YR FIXED - 3.875-4.0%
- FHA/VA - 3.75%
- 15 YEAR FIXED - 3.25%
- 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. Investors bet heavily the move lower in European rates and domestic rates benefited as well. But with those bets finally drying up in April and with the Fed seemingly intent on hiking rates in the US, May and June saw a sharp move back toward higher rates. The implicit fear is that global interest rates set a long term low in April, and have now begun a major move higher.
- July said "not so fast" to that potential "big bounce." Some of the data began to suggest the Fed is still a bit too early in talking about raising rates in 2015--particularly, a lack of wage growth or any promising signs of inflation. But Fed proponents maintain that low inflation is a byproduct of temporary trends in the value of the dollar and the price of oil, and that once these factors level-off, inflation will ultimately return. That side of the argument suggests that inflation could increase too quickly if the Fed hasn't already begun normalizing interest rates.
- With all of the above in mind, locking made far more sense for the entirety of May and June, and we were not shy about saying so. The second half of July saw that conversation shift toward one where multiple outcomes could once again be entertained. In other words, we went from "duck and cover!" to "let's see where this is going..."
- Bottom line, locking is always the safest bet and it was the only bet from late April through early July. Since then, there's been room for other points of view. We should know a lot more about how valid those points of view are as August and September progress.
- 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).