September 23, 2015
Mortgage rates held their ground fairly well today, despite moderate weakness in underlying bond markets (which normally translates to higher rates). Many lenders were right in line with yesterday's latest offerings while some were just slightly higher. That said, any day-over-day change in rates would be seen in the form of closing costs as opposed to the contract rate itself.
There was no significant theme in markets today as there were no significant economic releases. The most notable motivation was the sharp drop in oil prices after an inventory report this morning. This was very likely the deciding factor in bond markets being able to hold their ground. In other words, lenders may have raised rates in the middle of the day had it not been for the slide in oil prices. This isn't to suggest that oil prices will always have a positive correlation with rates, but big, intraday moves in oil frequently have an effect on broader financial markets.
Overall, rates continue to operate near their 4-month lows, with only 2-3 days seeing anything better over that time. The most prevalently-quoted conventional 30yr fixed rate for top tier scenarios remains 3.875% with a few lenders an eighth of a percentage point higher, and fewer still at 3.75%. -Ted Rood, Senior Loan Originator
Loan Originator Perspective
"The benchmark 10 year note has been unable to hold onto gains, so I think it is wise to strongly consider locking, especially if you are closing within 15 days. That said, tomorrow, we have our final treasury auction of the week, it it isn't uncommon for bonds to rally once all the new supply has been absorbed by the markets. This makes me think floating isn't a bad option either. As always, if you are happy with current terms offered, nothing wrong with locking in." -Victor Burek, Churchill Mortgage
"After recouping all of Monday’s losses yesterday we’ve drifted mostly sideways today. We can’t seem to push lower on the 10 year than the 2.13ish level which is where we were around September 5th. If you’re closing in the next few weeks locking may be prudent. If you’re able to sleep with a floating rate you may want to see where we head over the next few weeks. But as always, keep in close communications with your loan officer and give them implicit instructions to lock if they think things may go higher than your desired rate. Markets can move quickly. Make sure you’re working with an LO that is in the know and on the MBSLive site." -Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC
"My recurring theme the past few weeks has been rates' inability to move outside their current ranges, and today's flat market further confirmed that. Treasuries have stayed between 2.13-2.21 for 28 of the past 30 days, and look quite comfortable there. MBS traded within a narrow 50 bps range for the same period as well. One of these days, something will jolt markets into definitive moves higher/lower. What that will take, and when it will happen are the great unknowns. Folks within 30 days of locking could sure do worse than locking here. Those with longer timelines need to discuss floating's risk/reward ratio with their originator!" -Ted Rood, Senior Loan Originator
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).