March 22, 2016
Mortgage rates moved higher again today, casting a bigger shadow on last week's improvements. Rates haven't yet returned to the higher levels seen at the beginning of last week, but they're quickly closing the gap. Still, the notion of "higher rates" is relative when most lenders are still quoting the same contract rates today vs yesterday. It's only when we look at the upfront costs (or credit, depending on the scenario) that we see a deterioration. The average lender continues quoting conventional 30yr fixed rates in a range of 3.75-3.875%.
When it comes to the road ahead, yesterday's weakness alone was enough to call last week's positive trend into question. Naturally, today's weakness only adds to the negative vibes. To be sure, there is more room for rates to rise without setting off the most serious warning bells regarding the longer term trend, but the momentum is negative enough that it doesn't make sense to roll the dice without considering the risks. For those who choose the riskier path, be sure to set stop-loss level (i.e. locking to avoid further losses if rates rise to x.xx%).
Loan Originator Perspective
"Today's terrorist events in Brussels typically would have yielded a greater move lower in interest rates. The lack of the move lower can be attributed to a few factors, including the desensitization of these events, and the limited shock value they carry, or potentially the reality that bond bears are winning the fight. Good news today is that rates haven't moved higher, giving us another day in sub 4% 30 year mortgage rates, and the potential for a move lower. This week will be plagued with holiday schedules, therefore we must wait until next week for any real confirmation in either direction. I favor floating at this stage of the game." -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).