May 3, 2016
Mortgage rates moved lower again today as stock markets tumbled. The weakness in stocks was led by the European banking sector with several big names falling roughly 8 percent! Although mortgage rates in the US are by no means a factor of European stock prices, nothing too big happens in global financial markets without its effects being felt elsewhere. Today's stock weakness was big enough that investors sought safer havens, which typically include the US bond market. As money comes into the bond market, investors are willing to pay more for debt, such as the kind that's created by pools of mortgages. Lenders are then able to offer lower mortgage rates.
All that to say that mortgage rates fell to their lowest levels in about 2 weeks today. It wasn't a big move versus yesterday as rates were already near 2 week lows. In fact, several lenders aren't in noticeably better shape depending on how they handled yesterday's market weakness (the ones that kept rates lower yesterday were less likely to be offering big improvements today). On average, 3.625% remains the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios.
We'll increasingly see a precious few of the most aggressive lenders begin offering 3.5% again if bond markets continue to improve from here. Whether or not that happens remains to be seen, but today was an important victory for rates. If we'd lost ground, it would have confirmed a negative signal about momentum in the short to medium term. Now we have a fighting chance to see if momentum can build in a friendlier direction.
Loan Originator Perspective
"With all of yesterday's losses recouped today, I feel its worthwhile to float here. Floating will allow time for lenders to pass along the gains. It will also allow you time to see if these gains can be built upon. After yesterday's mini sell off, I think most lenders have been more conservative in passing along these gains. They are not sure whether they will hold." -Victor Burek, Churchill Mortgage
Today's Best-Execution Rates
- 30YR FIXED - 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.
- 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).