April 26, 2016
Mortgage rates remained in line with their highest levels in a month for the third straight day. The average lender is now quoting conventional 30yr fixed rates of 3.75% on top tier scenarios. Earlier this month, stronger lenders were as low as 3.5%, and the average had been 3.625% until late last week.
Unlike yesterday, there were several economic reports today. Frustratingly enough, the two biggest reports were both weaker--something that would normally push rates lower--but investors opted instead to brace for the unknown impact from tomorrow's Fed Announcement. The Fed is not expected to hike rates at this meeting, but they may use it as a venue to telegraph a June rate hike (much like they used the October Announcement to presage December's hike). Either way, market participants will likely be in a betting mood again by the end of the week. That said, those bets could go either direction. The only high probability bet is that rate movement will be much more volatile in the second half of the week.
Loan Originator Perspective
"So we’ve been creeping higher the last few weeks and seem to be reaching a boiling point just ahead of tomorrow’s Fed meeting. Funny how that seems to happen quite often. Being conservative and locking may make sense. Would you be more upset if your rate goes up 1/8th or down 1/8th. Always the key question when we reach these levels and ahead of potential news worthy market movers. We’ll know more tomorrow after 2pm. Good luck if you’re floating." -Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC
"Rates hovered near unchanged today, but trended slightly higher. All eyes/ears are pointed to tomorrow's FOMC statement; its tone may set the stage for our next move up/down. The bulk of my pipeline is locked, I don't anticipate the Fed's tone being dovish enough to drive rates down. At this point, a neutral Fed statement might be the best possible outcome, I just don't see enough disappointing data to sway Fed members' desire to raise the overnight rate. If you're floating, be ready to lock, things can change quickly." -Ted Rood, Senior Originator
"The market has been straying away from the recent more favorable levels. 1.87 has transformed to resistance from support. Very hard to call a lock/float decision today, but I think if you waited through the recent uptick in rates, it may be worth the crap shot for tomorrow's Fed." -Constantine Floropoulos, VP, The Federal Savings Bank
Today's Best-Execution Rates
- 30YR FIXED - 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 have seen only brief episodes of volatility in a low, narrow range.
- Some of the forces that had been helping rates are now at risk of reversing course. Namely, stocks and oil have been trying to break higher and European bond markets bounced near all-time lows.
- We'd already switched to lock bias on April 12th due to the end of a downtrend in rates, but now we're now in a situation where rates may be embarking on a trend higher. Locking is a safer bet until such a move can be ruled out.
- 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).