January 28, 2016
Mortgage rates moved down modestly today, but it was enough to bring them to the lowest levels seen in exactly 3 months. There were only a few days in October where rates were any lower and before that, you'd have to go all the way back to April to do any better. The improvements were generally still seen in the form of upfront costs as opposed to the actual contract rates themselves. Most lenders remain in a range of 3.75-3.875% on conventional 30yr fixed quotes for top tier scenarios.
Despite reaching these long term lows, risks remain. Any time rates (or any financial metric, for that matter) consolidate in a sideways pattern, the risk is that the next move will be a bigger break outside the range, for better or worse. With this particular sideways pattern lying on 3-month lows, it makes sense to guard against the bigger break higher, or at least to take advantage of what exists today. If you're not in a locking mood, you might still be rewarded, but just make sure you set a limit as to how much rates could rise before you'd lock to prevent further losses.
Loan Originator Perspective
"Mortgage Rates improved slightly today, and the 10 year has just dipped below 2%. That is a positive sign, but at this time there certainly isn't confirmation that a strong move lower is coming. If I, personally, was faced with the decision to lock or float, I'd lock. Rates are going to make a move drastically, in one way or another soon, and if I don't lock and rates go up I'd be upset. If I lock and rates go down drastically, I can ask my lender about their float down policy and get a bit of the best of both worlds. Good luck!" -Brent Borcherding, brentborcherding.com
"It seems rates do not want to move any lower right now. The 10 year has been unable to break 1.98 after several attempts, so this is a near term floor. Following the strategy of lock the lows, float the highs, I think today is a good day to lock. Until that level gets broken and verified with a close below that level the next day, I will advise clients to lock." -Victor Burek, Churchill Mortgage
"Bonds traded higher today, as rates improved following disappointing data and a strong treasury auction. As of early afternoon, benchmark 10 year treasuries were yielding under 2%, which has been a floor for yields. If we can close without losing ground, it will indicate significant demand for bonds (which means lower rates). For now, I'll continue floating new applications, at least until within 15 days of closing and/or market sentiment changes. The trend is our friend, let's enjoy the ride." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.75-3.875%
- FHA/VA - 3.5%
- 15 YEAR FIXED - 3.125-3.25%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- The Fed finally hiked on December 16th. The baseline implication would be steady pressure toward higher interest rates, but there's been "a catch" so far in 2016
- Global financial markets have come into the new year in distress. Major stock indices are plummeting around the world, and investors are seeking shelter in the bond market. When investor demand for bonds increases, rates fall.
- So we're left with a move toward the lowest mortgage rates in 7 months despite the Fed having just begun its hiking cycle. This paradoxical trend can continue as long as global risk markets continue selling-off. The big risk is for a big bounce if global risk markets happen to find their footing.
- 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).