April 8, 2016
Mortgage rates didn't necessarily improve today--some lenders were worse-off actually--but merely holding steady on average, rates are ending the week at their best levels since at least January 2015. Some lenders are at their best end-of-week rates in nearly 3 years. To be clear though, rates were definitely lower on February 10th and 11th of this year, but neither was a Friday. They were, in fact, a Wednesday and Thursday, meaning that they largely went uncounted by Freddie Mac's weekly rate survey. As such, the news is rife with articles proclaiming the lowest rates of the year this week, even though that's not exactly the case.
Still, rates are pretty darn low, with the average lender continuing to quote conventional 30yr fixed rates of 3.625% on top tier scenarios. Several lenders continue offering 3.5% and a few are still up at 3.75%, but the outliers are just that.
In terms of strategy, nothing has changed from yesterday. It's never a bad idea to lock in gains if you've been floating for a while, but we are definitely in the middle of a trend toward lower rates. In financial markets, trends can end at any time, but as long as you're prepared to lock when that happens, and understand that it will be a slightly worse deal than it was the day before, floating is an equally sound strategy at the moment for risk-tolerant borrowers.
Loan Originator Perspective
"My rate sheets were the best of the week today, but only improved only marginally from yesterday's. There's been a relentless wave of downbeat economic news the last couple days, from Fed speakers, GDP revisions, and ECB comments. While I'm not sure they'll be enough to drop rates more, they provide support for our current levels. Risk averse borrowers who lock now get great pricing. More aggressive folks who float may see further gains, but shouldn't presume rates only go down." -Ted Rood, Senior Originator
"Much of yesterdays gains have been erased today. There doesn't seem to be much reason for this. Could just be some profit taking ahead of the weekend. If you can afford to be wrong, I would continue to float and evaluate your pricing on Monday." -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).