May 12, 2016
Mortgage rates moved higher again today, rising to the highest levels since last Thursday. That fact is contrary to the most of the mortgage-rate-related headlines out today, so what gives?!
The discrepancy is simple and not uncommon on Thursdays. That's when Freddie Mac releases its weekly mortgage rate survey. That data is subsequently gobbled up and turned into articles by major media outlets, which tend to overlook the limitations of the Freddie data. Specifically, the survey generally captures rate quotes that are available on Mondays and Tuesdays, with the occasional big Wednesday morning causing some small movement. In other words, it really only measures 2.5 days of the week.
Even though the Freddie survey does a good job tracking those 2.5 days each week and expressing them in an average, most folks reading about mortgage rates are more interested in what they can get TODAY as opposed to a retrospective. That's not usually a problem if rates aren't moving too much. Whatever was available on the first half of the week tends to be available during the second half. That's mostly true today, although we have drifted a bit higher from Tuesday's levels which were the more appropriate "3-year low."
Loan Originator Perspective
"New treasury supply is out of the way. After some weakness this morning, bonds are trying to turn positive. Like yesterday, I think it might be worthwhile to continue to float to see if we can break the low end of our range." -Victor Burek, Churchill Mortgage
"There has been plenty of negative economic data circulating the global market radar, but not enough to push bond yields lower. This may be a concern for some to consider locking as a defense play, but the trend is still intact, albeit in consolidation mode. Floating is still a viable approach, but if you have a closing in the horizon of the next 15 days, locking may be the way to go." - Constantine Floropoulos, VP, The Federal Savings Bank
"Rates regressed some today, amid some Fed comments that their "current interest rate target is too low." It appears we've hit the short term bottom for rates, as MBS' prices haven't posted gains in the last 5 days. My pipeline is locked, with the exception of a couple of June closings. Floating borrowers need to have risk tolerance, I'm be surprised if rates don't continue to drift upward (short term) from here." - Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.5 - 3.625%
- 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.
- The Fed's most recent announcement at the end of April reinforced their cautious approach to rate hikes. The last time that happened, stocks cheered, but this time they've been moving lower. Bond markets like that, and they'll continue to like it until stocks prove they can break back above 2015 highs.
- Even though the broader backdrop has taken a positive turn for rates, there are still tactical opportunities to lock. In general, we look for any prolonged moves lower (i.e. 10 days in a row without moving higher) or any major low-rate milestones (i.e. 3-year lows).
- 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).