April 29, 2016
Mortgage rates moved just slightly lower in most cases, to end the week at the best levels since April 19th. Mor importantly, the past 3 days of improvements go a long way toward defeating a worriesome trend toward higher rates that began in early April. With the recent gains, the average conventional 30yr fixed rate is back down to 3.625% on top tier scenarios after having briefly moved up to 3.75%. That said, keep in mind that rate sheet offerings have varied more widely than normal from lender to lender due to recent market volatility.
Mortgage rates are primarily determined by trading levels in bond markets. A lot of bond market participants are required to be holding a certain mix of bonds at the end of the month. As such, the beginning and end of any given month marks a time of increased momentum as traders adjust their holdings. In other words--plainer words--there is simply some extra motivation for rates to move higher or lower at the beginning and end of the month. The implication is that the past 3 days of improvements in mortgage rates could be factor of that "month-end" set of motivations, and we'll need to see how things are going next week before officially declaring an end to our recent troubles.
Loan Originator Perspective
"It appears bonds want to close the week at their lows. As is pretty common for a Friday, most lenders are holding back the gains. I started this morning leaning toward locking but with bonds rallying into the close, I am now favoring floating over the weekend." -Victor Burek, Churchill Mortgage
"My pricing improved marginally today, compared with yesterday's PM rates (which improved over the AM's), as MBS and treasuries ended at the week's best levels. The big question is whether market momentum carries into next week, which ends with April's NFP employment situation report on Friday. I love the fact we posted 3 consecutive days of gains, let's shoot for more. Floating borrowers (and their LOs) need to have clear goals for their loans; if pricing worsens, when do you jump off your float boat?" -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 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.
- After being "lock-biased" for several weeks, a window of opportunity may be opening up after the Fed avoided sending any clear warnings about a June rate hike. We'll reassess the broader trend by the end of the week.
- 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).