September 30, 2015
Mortgage rates had another great day, with most lenders maintaining or improving upon yesterday's 4-month lows. Given that we'd have to go back to May 8th, 2015 to see better rates, we're very close to '5-month lows.' In terms of top tier conventional 30yr fixed rate quotes, 3.875% remains most prevalent. A growing number of lenders are quoting 3.75% and only a few remain up at 4.0%. Not all borrowers will see a change in their quoted rate over the past few days, but in those cases, the closing costs would be lower or the lender credit would be higher.
Although there was a reasonable chance that we'd see increased volatility in the markets that underlie mortgage rates today, trading remained calm and positive. Stock prices and bond yields continued to diverge. This could have something to do with the way investors approached the end of the month and quarter. In other words, the volatility that was a risk today, could instead simply be waiting for the new month/quarter tomorrow. In any event, Friday's big jobs report always has the potential to send rates quickly in either direction. While that does mean there could be further improvement for those willing to roll the dice on the economic data, it's hard to argue against taking that risk off the table with rates near 5-month lows.
Loan Originator Perspective
"Once again, month end bond buying has been good for mortgage rates. We are a pretty much at the best levels since May! Lock the lows, float the highs. I favor locking everything up today closing within 30 days. Non farm payrolls hits on Friday, so I am expecting some weakness tomorrow ahead of that report. " -Victor Burek, Churchill Mortgage
"Bond markets continued to hang tough today, posting small gains, and loan pricing improved slightly. It is refreshing to not see a 4 day pre-NFP selloff, as we sometimes do. Tomorrow will be the litmus test for this market, as month end buying will no longer be a factor. With pricing as strong as it is, I have to consider locking floating loans, particularly if they are within 30 days of closing. While we're at the bottom of our recent range today, we haven't definitively broken it, and until we do, floating seems like a high risk/low reward proposition." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.875
- FHA/VA - 3.5 - 3.75%
- 15 YEAR FIXED - 3.125 - 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).