April 13, 2016
Mortgage rates pulled up just slightly today after spending the past few days near 3-year lows. The weakness in rates is in line with our discussion yesterday regarding the fact that bond markets were already suggesting a small move higher, but that quite a few lenders held-off adjusting rate sheets in the middle of the day. The underlying assumption was that--all things being equal--we were due a bit of a move higher today, simply because we avoided it yesterday largely due to timing.
Indeed, it's those lenders that abstained yesterday who are more noticeably weaker today. Even so, we're not talking about huge changes. The most prevalent conventional 30yr fixed rate quote remains 3.625% on top tier scenarios, and there are still a few aggressive lenders down at 3.5%. That means most of today's deterioration would be seen in the form of slightly higher upfront closing costs as opposed to in the Note Rate itself. There is excellent "point/counterpoint" below from Brent and Victor when it comes to locking vs floating. They perfectly capture both sides of the risk/reward spectrum.
Loan Originator Perspective
"Mortgage Rates are near 3 year lows and for that reason alone, I believe locking is the best option. If you've been thinking of refinancing, it makes sense where you're at today, then cease the opportunity. I feel the exact same way on purchases...what are you waiting for?" -Brent Borcherding, brentborcherding.com
"I like floating here. We had a very strong auction indicating that buyers will step in when 10 year note is near 1.80, so that should be some great support to prevent rates from jumping quickly. Rate sheets were issued early this morning when bonds were in the red, but following the auction we are well into the green and some lenders have already repriced for the better. We also have our final auction of the week tomorrow. With new supply out of the way, I am hopeful that yields can at least hold ground here or move lower." -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 3.625%
- FHA/VA - 3.25%
- 15 YEAR FIXED - 2.875 - 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).