October 4, 2016
Mortgage Rates moved significantly higher today, relative to recently narrow ranges. It's enough to bring the most prevalent conventional 30yr fixed quote back up to 3.5% (from 3.375%) on top tier scenarios. While that might now sound like a lot in and of itself, the risk is that it's the beginning of bigger move that could take months to fully play out. Of course, if we knew that would happen, then rates would be moving a lot higher right now. For now, all we have is elevated risk--a call to battle stations, if you will. It could turn out to be a false alarm, but only time will tell.
The source of today's panic is speculation that Europe is getting closer to its own version of "tapering." This refers to the gradual reduction in the amount of bonds being purchased by central banks. In the US, the "taper tantrum" in mid 2013 was the result. Even though a European version would impact Europe primarily, European bond buying is an important factor in bond market strength around the world. That strength manifests itself in low Treasury yields and mortgage rates in the US (among other places). It's safest to favor locking until we can rule out a European reprise of the taper tantrum.
Loan Originator Perspective
Bonds have broken some support most likely based on rumors out of the Europe that they will begin tapering in the near future. As of 1pm eastern, only a couple lenders have repriced for the worse as the losses to MBS have been minimal compared to treasuries. I think locking here is the wise choice. -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.5%
- FHA/VA - 3.25%
- 15 YEAR FIXED - 2.75-2.875%
- 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).