March 31, 2016
Mortgage rates dropped again today, continuing a recent trend of improvement and bringing us to the best levels seen since March 1st. Market volatility is still making for a wide variety of pricing strategies between lenders with some of them easily back down to 3.625% on conventional 30yr fixed quotes while others aren't quite there yet. Either way, the average lender is more likely to be quoting 3.625% on top tier scenarios than on any other day this month.
The timing is dramatic, with today being the last day of the month/quarter and also the day before the important Employment Situation report (aka "jobs report"). The month/quarter-end designation is important because it creates a relative frenzy of trading activity regardless of the economic data or events. When there are big moves like this, they almost always guarantee a bigger move on the following day. It just so happens that the following day is already doing just fine as far as motivations for big moves, because the jobs report is the most important piece of economic data on any given month.
The only catch is that the probabilities pertain to the total amount of movement, and not to the direction of the movement. In other words, chances are higher for a big change in rates tomorrow, but it could go either way. Any time rates are at one-month lows and there is big potential volatility ahead, it's never a bad idea to lock. That said, if tomorrow happens to go in our favor, the improvement could be worth the risk to more aggressive borrowers. Either way, make sure you have a game-plan in place for either outcome, and that all parties involved are on the same page.
Loan Originator Perspective
"Tough call to float or lock today. Bonds and rate sheets have enjoyed nice gains the last few days, so if you have been floating you can lock today and be a winner. Floating into NFP day is always risky, but if you can tolerate the risk and afford to be wrong, it could pay off big. If you do wish to remove risk and lock today, wait as late as possible as many lenders have repriced better and more should be coming." -Victor Burek, Churchill Mortgage
"Mortgage markets typically get defensive (lose ground) on Non-Farm Payrolls' week, but that isn't the case today. We built on Tuesday's "face melting" rally, which tells me global economic concerns are now driving markets. This may be the first NFP I haven't recommending locking, but outside of a remarkably strong report, the trend is still our friend. My pipeline within 30 days of closing is locked, but for those with more time, will float for now." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.625-3.75%
- 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 HAD been leaning toward locking since March 1st, which has proved to be a very solid strategy, but began to reconsider starting the 3rd week of the month. We've been more open to the idea of floating since then, as long as you're setting a stop-loss level somewhere overhead, meaning you'd lock to avoid further losses if markets move against you.
- 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).