May 5, 2016
Mortgage rates held steady today, marking the 9th straight day without a move higher. 6 of those 9 days have seen mild to moderate improvements, ultimately bringing rates back within striking distance of 2016's lows. Only a few days in early February have been better and from there it's only a short distance to all-time lows from 2012. Most lenders continue quoting conventional 30yr fixed rates of 3.625% on top tier scenarios, but a few are already back down to 3.5%.
With the impressive run we've seen so far in addition to the outright levels being close to the year's lowest, there's limited incentive to delay locking. To be sure, rates can definitely continue to move lower, but past precedent suggests the current scenario is typically a better locking opportunity.
Tomorrow brings the important Employment Situation report--the most important piece of economic data in the US on any given month. It always has plenty of potential to move bond markets (and thus, rates), although the generally strong level of job creation is old news to some extent. Financial markets may instead focus on other aspects of the report, like the average hourly wage component, because it speaks to inflation. Inflation is the last major hang-up for the Fed when it comes to continuing to hike rates. If market participants view the Fed as more likely to hike, present day interest rates will likely rise in advance of the next Fed meeting.
Loan Originator Perspective
"Bond yields are searching for reasons to go lower. Can't say it enough, the trend is your friend. I am riding this rally into tomorrow's employment data, momentum is certainly in our favor." -Constantine Floropoulos, VP, The Federal Savings Bank
"Rates trickled slightly lower today on NFP Eve. The continued downtrend during NFP is curious, this is the one week monthly where trading is typically defensive. My loans closing within 30 days are locked, those further from closing mostly floating. If a poor jobs report is priced into markets now, it's possible an average report tomorrow could hurt pricing, If you're floating, hope you have time before closing, just in case tomorrow's pricing isn't pretty." -Ted Rood, Senior Originator
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).