May 26, 2016
Mortgage rates moved modestly lower today. Given that rates had spiked last Wednesday and haven't moved too much since then, today's improvement was enough to get rates to the best levels seen since last Tuesday. That might sound odd or ironic in light of today's widely-circulated mortgage rate data from Freddie Mac. Freddie says that rates rose rather sharply, but that's to-be-expected given the report's methodology (which essentially provides a snapshot of Monday and Tuesday's rates).
In other words, the rates seen at the beginning of this week were definitely higher than those seen at the beginning of last week. But last week's damage was already done by Wednesday afternoon. Since then, we've been sideways to slightly lower.
Loan Originator Perspective
"We seem to be stuck in a 1.8 range on the 10 year treasury. While this continues I favor floating until something happens to indicate which side of the range we end up on. Keep in mind even if rates do not improve floating can have some benefit since a short lock is always better than a long lock." -Jason B. Anker, Vice President- Loan Officer at Salem Five
"Pricing improved today, despite the release of strong economic data that would typically trigger higher rates. We've seen this pattern before, bond traders have to ensure their portfolios meet certain requirements at months' ends, which can lead to MBS gains despite data, rather than due to it. It's nice to catch a break, but important to remember it may well be short lived. Tuesday is month end, but my hunch is most traders will square their positions by tomorrow (or later today) due to Memorial Day weekend. If your pricing looks good, and you want to relax, pretty good day to lock." -Ted Rood, Senior Loan Originator
"My clients are mostly locked for the next 30 days. I continue to determine their comfort level or risk tolerance for fluctuation. We are nearing consolidation in our ever narrowing 10 year treasury triangle during this year - Yields are hitting lower highs, but also higher lows. All of this while the Fed overtly shouts "we are raising short term rates" soon. What does this mean? Historically, a break out at the end of this triangle produces higher yields initially, then lower over months following. Lock short term deals, weigh risks on longer term." -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
"There's been a lot of media coverage pointing to a potential rate hike causing borrowers to panic lock. I've been steering most clients to be patient as rates have been in a narrow confined range and have not taken the initiative to move aggressively in either direction for quite some time. As always, I clearly communicate to understand the goals for the client and I am ready to lock immediately if need be." -Constantine Floropoulos, VP, The Federal Savings Bank
"Nice price action today. Month end forced buying or traders betting for a better June? Tomorrow should be, emphasis on should be, quiet for a Friday before a 3 day weekend. We’ll see what Tuesday brings but we definitely haven’t seen all the gains from today’s move so patience may be worth it and there’s a little protection in the pricing for now. So less anxiety on the lock/float decision for the Memorial Day Weekend." -Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC
"Month end trading appears to be benefiting the bond market. We also had our final treasury auction of the week. If your lender has repriced for the better today, locking now would probably be a wise choice. If your lender hasn't repriced today, I think floating overnight is worth the risk." -Victor Burek, Churchill Mortgage
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.
- The Fed's most recent announcement at the end of April reinforced their cautious approach to rate hikes. This helped rates improved through mid May
- Now some investors are getting concerned that the Fed may be more prepared to hike rates than markets currently expect. This could create volatility and pressure toward higher rates heading into the June Fed meeting, thus favoring locking vs floating.
- 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).