February 18, 2016
Mortgage rates finally held their ground today, earning back some of the ground lost over the past 3 days. While a substantial gap remains between today and last week's lows, rates did manage to fall in line with Tuesday's (the lowest so far this week).
Mortgage rates improve when trading levels in the underlying bond market--specifically, mortgage-backed-securities (MBS)--improve. Today's bond market improvements were swift. On those occasions, it can take lenders some time to adjust rate sheets accordingly. In other words, if bond markets simply held steady, lenders would likely be able to bring rates lower still. While lenders did reissue improved rate sheets at some point today, most seemed a bit more cautious than normal in that regard. This is quite common in the wake of the sort of volatile episode seen over the past few days.
The most prevalently-quoted conventional 30yr fixed rates continue in a range of 3.625% to 3.75%, but should be expected to edge definitively toward 3.625% if markets are steady or better tomorrow. Of course there's never a guarantee that markets will do what you want them to do in the future. It remains to be seen whether today was merely due to a market correction to the previous 3 days or if the previous 3 days were collectively a correction to a longer-term trend of improvement (one that can now continue).
Loan Originator Perspective
"Bond markets bounced back today, and most lenders' rates improved from their initial release. We're basically back to late Friday's levels, but need more improvement to equal our best pricing, which was Feb 10th. At any rate, it's encouraging to regain ground after only a brief sell off. I'm locking loans closing within 30 days, and risk averse borrowers may want to do so as well." -Ted Rood, Senior Originator
"Tread with caution. We tested the upper realm of recent support (1.84 on the 10 Year Treasury), and have moved down, but really not enough to call it a reversal. Locking makes sense, but I will hold off and watch the trade unravel. " -Constantine Floropoulos, VP, Quontic Bank
"It appears we have some solid support on the benchmark 10 year note at 1.84. We are enjoying a nice bounce off that this morning. Several lenders have repriced for the better as of mid afternoon, and more should be coming. I think it may be worth the risk to float into tomorrow to see if this trend will continue. If you must or want to lock today, wait until as late as possible to allow your lender the time to hopefully reprice for the better." -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.625
- FHA/VA - 3.25-3.5%
- 15 YEAR FIXED - 3.00
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- The Fed finally hiked on December 16th, causing fears of rising rates in 2016.
- But global financial markets came into the new year in distress. Now markets aren't even convinced that we'll see another Fed rate hike in 2016. Major stock indices 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).