January 29, 2016
Mortgage rates were at 3 month lows yesterday and today have moved in line with 8-month lows. For most lenders, there was a day or 2 in October that was just slightly better than today, but the differences are negligible. Before that, you'd have to go back to April to find anything remotely as good. At these levels, some of the most aggressive lenders are quoting 3.625% conventional 30yr fixed rates on top tier scenarios. Most remain at 3.75% with a few stragglers at 3.875%.
Yesterday, I mentioned the risks associated with the sort of sideways movement we'd seen in financial markets in recent weeks. Today does NOT qualify as the first step in breaking out of that pattern--not by itself anyway. The last day of the month can often have a life of its own in terms of momentum. We'd need to make sure next week's momentum matches before getting too excited about it. Besides, 8-month lows are pretty exciting in and of themselves.
Loan Originator Perspective
"Mortgage rates improved, again, today and I still believe now is great opportunity to lock. That said, spending this much time below 2% on the 10 yr treasury certainly increases the likelihood of a move lower, but it certainly isn't a given. Locking is certainly the most logical solution, but a gamble could certainly pay off...Float until Monday?" -Brent Borcherding, brentborcherding.com
"Bonds opened strong, and maintained most of their gains, after tepid GDP data and a surprise rate cut by the Bank of Japan. Treasuries are now well below the 2% barrier I referenced yesterday (1.93% mid PM), which is encouraging. The wild card in today's rally is whether end of month buying accounts for part of our rally. I locked two loans for borrowers whose lender credit increased substantially, still patiently waiting on others who are early in the loan process. As macabre as it might seem, world-wide economic distress helps rates, and it appears there's more of that to come." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.75
- FHA/VA - 3.5%
- 15 YEAR FIXED - 3.125
- 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 came into the new year in distress. Major stock indices are plummeted around the world, and investors sought shelter in the bond market. When investor demand for bonds increases, rates fall.
- So we're left with much lower mortgage rates despite the Fed having just begun its hiking cycle. This paradoxical trend can continue as long as global market turmoil fuels a demand for safer haven investments. A big bounce in oil/stock prices could mean trouble for rates--at least temporarily.
- 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).