October 5, 2016
Mortgage Rates were higher again today, following much stronger-than-expected economic data. A key index that tracks the health of the services sector recovered from last month's 6-year lows, hitting the best level in nearly a year today. Stronger economic data generally puts upward pressure on rates. Not all data is as potent in that regard, but today's report from the Institute for Supply Management (ISM) is one of the biggies.
Rates also remain under pressure in a general sense because market participants increasingly wonder if Europe is at a crossroads with respect to its bond-buying program. More simply put, the European Central Bank might slow down its bond buying, and central bank bond-buying is why rates are as low as they are.
Rates have now returned to their highest levels since before the UK voted to leave the European Union (Brexit) in late June. For most lenders, that means conventional 30yr fixed quotes of 3.5-3.625% for strong scenarios.
Loan Originator Perspective
Rough couple days for rates, but hopefully we have found support at 1.73 on the benchmark 10 year treasury note. Following the strategy of float the highs of the range and lock the lows, i favor floating overnight. This is risky as non farm payrolls data hits Friday morning and it always has the chance to move rates in a big way. -Victor Burek, Churchill Mortgage
Bonds posted further losses today, and rates rose as a result. It's now obvious the trend is NOT our friend at the moment, and that means (to me) lock sooner, not later. Fortunately, the selloff has been orderly so far, haven't had any "face melting" days when rates worsened multiple times. Betting against the house is typically a bad move, and right now, the house says bonds are selling off. Float at your own risk. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.5-3.625%
- 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).