March 21, 2016
Mortgage rates moved higher to begin the new week as stocks and oil prices moved up from Friday afternoon's lows. Today's increases cast a shadow on what had been shaping up to be a nice bounce last week. That 'bounce' refers to 4 out of 5 days where rates fell moderately after rising rather quickly in the previous 2 weeks.
If we want to quantify the battle, we could say that rates were trying to make it back to 3.625% last week, in terms of the most prevalent conventional 30yr fixed rate quote on top tier scenarios. They were nearly there by Friday, but have now bounced up to remain in the 3.75%-3.875% range that dominates most of the past 3 weeks.
In terms of strategy, I was somewhat hesitant to take on any new risk based on last week's medium-slow improvements. I would have liked to have seen some confirmation today, and we're clearly not getting it. Depending on your level of risk-tolerance, we are arguably already back to levels that act as stop-loss warnings for those who chose not to lock last week.
Loan Originator Perspective
"Bond investors do not appear to want to push yields any lower than current levels. At this point, I do not see much to gain by floating. I would recommend those within 30 days of closing to go ahead and lock in and remove all risk. Keep in mind, rates always move higher much faster than they will fall." -Victor Burek, Churchill Mortgage
"Rates wandered upward today, as Fed speakers cited growing consumer demand on this 3.5 day Easter week. We are still well below last Wednesday's rates, but that could change quickly. Given the short week and today's losses, I'd advise borrowers within a month of closing to lock, if happy with current pricing. Folks with 45 days or more before closing, with risk tolerance, may want to float, provided they won't lose their loans if rates go up by .125%." -Ted Rood, Senior Originator
"Technical levels in bond markets are rejecting a move lower in rates. This may just be an interim pause before a decisive move lower, but after we broke above 1.84, and failed to get back below that same level, it may be a confirmation of a new trend in rates higher. This may cause some to panic, but generally speaking interest rates are near historic lows, locking in always removes the risk of tomorrow. I am of the firm belief that we will see lower rates, and believe it's only a matter of time that this unravels." -Constantine Floropoulos, VP, Quontic Bank
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 markets began the new year with rates moving surprisingly lower. Major losses in stocks and oil prices were part of the same trend of investors moving away from risk.
- After bottoming out fairly close to all-time lows in February, rates began to rise somewhat sharply in March as market panic subsided and as the Fed signaled it would probably still hike rates in 2016--just not as quickly as anticipated.
- It remains to be seen whether markets can continue to move in this risk-friendly direction (read: bad for rates, good for stocks). Stocks have yet to break out of a gradual downtrend that began in mid-2015. If they do, it could keep pressure on rates to continue higher.
- We've been leaning toward locking since March 1st, which has proved to be a very solid strategy. The 3rd week in March is the first time that it made much sense to reconsider that strategy, but we still haven't seen enough of a turnaround to pull the trigger firmly. In other words, risks remain that rates are in the earlier stages of a longer term trend higher.
- 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).