October 3, 2016
Mortgage Rates were higher today, with most lenders at their highest levels in nearly 2 weeks. The bond markets that underlie mortgage rate movement responded negatively to this morning's slightly stronger manufacturing data. In general, because bonds represent a way for investors to seek lower, safer returns, stronger economic data causes bonds to weaken and rates to move higher. But most lenders were already out with today's higher rates by the time the manufacturing data hit. That means lenders avoided raising rates on Friday as bond markets weakened into the afternoon.
What's the point of all this? Simply put, much like Friday afternoon, we've had bond market weakness today that has yet to be priced-in to lenders' rate sheets. That means rates start with a bit of a disadvantage tomorrow, and would require decent improvements in the morning in order for lenders to offer rates that are the same or better versus this afternoon.
3.375% is still the most prevalent conventional 30yr fixed quotes on top tier scenarios, but 3.5% gained some market share with today's weakness.
Loan Originator Perspective
September has passed, and potentially Deutsch Bank's immediate liquidity woes as well. Bond markets were (surprise) flat today, and my pricing was minimally better than Friday's. The only immediate motivation for floating I see is Euro angst, and some of that is already priced into current rates. Locking here would not be a mistake, especially if closing in October. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.375%
- FHA/VA - 3.25%
- 15 YEAR FIXED - 2.75%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- In the biggest of pictures, "global growth concerns" remain the driving force behind the long-term trend toward lower rates
- Amid that trend, periodic corrections toward higher rates can and will happen. These can happen for no apparent reason, or they can be brought on by changes in expectations surrounding central bank policy at home and abroad, as well as geopolitical and systemic risks
- Time horizon and risk tolerance are 2 variables to consider when it comes to locking. If you have plenty of time and don't mind losing some ground, set a limit as to how much higher rates could go before you'd lock to avoid further losses, and then float in the hopes of never seeing that limit.
- In the shorter-term, it's always good to look for lock opportunities after rates have been moving lower or sideways repeatedly, especially if they've since begun to move back up in any sort of consistent way.
- 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).