September 24, 2015
Mortgage rates ended the day roughly in line with yesterday's latest levels on average. Rates were lower earlier this morning as bond markets got off to a strong start and stayed strong through the time of morning that most lenders release their first rate sheets. Generally, most lenders were close to their best levels in 4 months, though most had at least one day in late August that was slightly better.
As the day progressed, the positive momentum began to wane. Part of the earlier strength came courtesy of weakness in equities markets. That weakness was fueled (no pun intended) by ongoing headlines surrounding Volkswagen's diesel scandal. A German newspaper leveled similar accusations at BMW, and global stock markets sold first and asked questions later. Eventually, the paper retracted the comments and stock markets rallied into the afternoon.
This only affected mortgage rates today because the bond market (which includes mortgage rates) has been well-correlated with stocks over the past few days. Some of the earlier strength in rates was indeed due to weakness in stocks. So when the latter came roaring back in the afternoon, rates were pushed higher as well.
Loan Originator Perspective
"The post supply bond rally has taken shape today. MBS are at their best levels in a month, but most lender pricing haven't passed along the gains. I suspect later today we will get some reprices for the better. If your lender does reprice for the better, and you are within 15 days of closing, you should consider locking. I would float if closing in a longer time frame." -Victor Burek, Churchill Mortgage
"Testing the lower threshold of the recent range, but no new break out of the broader range. I would advise locking into these dips. Until we see a move lower below the recent trend I would take what the market gives us. Pricing today is very attractive, floating is not warranted unless you have time to kill. I am a believer we go lower, the question is what type of market gyrations will occur in between. Lock 'em if you got 'em." -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..." Even the Fed took a similar stance when it held off raising rates when it had an excellent opportunity to do so in September's meeting.
- 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).