October 20, 2016
Mortgage Rates were lower again today, after the European Central Bank (ECB) avoided sending any scary signals about tapering its asset purchases. Much like the Fed conducted quantitative easing (QE) in the US by buying US-based bonds, the ECB has been buying various European bonds under its own easing program. In both cases, the effects helped bring down rates around the world. There has been some speculation that Europe is getting close to their own version of the Fed's 2013 "taper tantrum" (which refers to the quick move higher in rates in response to the Fed saying it would soon be reducing QE purchases).
The ECB says they'll probably give us an update in December, so interest rates live to fight another day. Had the ECB confirmed tapering rumors, rates would likely be much higher today. As it stands, rates were able to inch lower for the 4th straight day, bringing them to the best levels since October 7th. This is contrary to most mortgage rate reports from major media outlets because those reports are based on Freddie Mac's weekly rate survey (which can lag reality when rates are somewhat volatile).
To be sure, rates are definitely not higher than last week, even though they're not much lower. The average lender continues quoting conventional 30yr fixed rates of 3.625% on top tier scenarios, with the improvements being seen in the form of slightly lower closing costs.
Looks like we are further consolidating at the current levels. Short term charts (5 day or so) indicate a possible start of a downtrend, but almost all longer term charts indicate to the contrary (especially the 1 Year charts). Until we have a bit more of a defined break of the current upward momentum in rates the intelligent move is to lock in. Specifically for loans with a clear path to close within 30-45 days, locking should be the only approach. -Gus Floropoulos, VP, The Federal Savings Bank
Today's Best-Execution Rates
- 30YR FIXED - 3.625%
- FHA/VA - 3.25-3.5%
- 15 YEAR FIXED - 2.875%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Rates have generally been trending higher since hitting all-time lows in early July
- Clearly-defined uptrends provide higher-than-average motivation to lock
- Risk-takers can try to time the dips in rates that may occur during that broader uptrend, but the reward for good timing generally isn't worth the risk in these situations.
- We'd need to see a sustained push back toward lower rates (something that lasts more than 1-3 days) before anything less than a cautious, lock-biased approach makes sense for all but the most risk-tolerant borrowers.
- 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).