March 14, 2016
Mortgage rates moved slightly lower today, for the second time in March. Unfortunately, the improvement did little to erase the recent weakness, which, as of Friday, had carried rates to their highest levels since late January. We're essentially still right there, but with slightly improved closing costs, depending on the lender. The most prevalent conventional 30yr fixed quotes remain in a range of 3.75% to 3.875% for top tier scenarios.
Any time that rates have a winning day after such a steady streak of losses, it's tempting to conclude that things might be changing. While that will always be a possibility, it usually makes more sense to reserve judgment until we see a firm shift in the trend. With respect to today, specifically, it's not too surprising to see financial markets calming down a bit with this week bringing the big Fed Announcement on Wednesday. There is often a period of momentum followed by a brief consolation (in financial markets, and thus, mortgage rates) heading into this sort of big-ticket event.
When it comes to the Fed, this week's announcement is important simply because markets may have a big reaction to it. Most analysts see very little chance of the Fed raising rates. And even then, the connection between the Fed Funds Rate and mortgage rates is inconsistent at best. There's no telling which way the momentum will be moving on Wednesday afternoon, making both risk and reward elevated.
Loan Originator Perspective
"Bonds leveled off today, as the upward rate trend at least paused. There was scant data to motivate bond traders, but the rest of the week brings copious data, including CPI and the Federal Reserve statement (with subsequent press conference from Chairwoman Yellen). Floating borrowers still need to be aware that a robust economic data or rhetoric could easily send rates higher. Float with caution. " -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.75-3.875%
- 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.
- We were 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 of March 1st, stock markets look like they're at least attempting to get back toward higher levels. Mortgage rates have been pressured higher accordingly. While we're well off the lows seen in early February, we're still in very low territory historically--low enough that it wouldn't make sense to second-guess a decision to lock, even though there's still a possibility that the longer-term trend toward lower rates could continue.
- 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).