June 21, 2016
Mortgage rates remained under pressure today, moving up to the highest levels in two weeks. Financial markets are in the process of undoing some of their defensive maneuvers ahead of this week's referendum vote on the U.K. exiting the European Union (informally known as "Brexit"). Until last Friday, those maneuvers resulted in rates moving lower, because investors were buying bonds to protect against the risk of the U.K. leaving the EU. But as sentiment has shifted regarding the probable outcome of the referendum, rates moved higher.
Once again, mortgage rates haven't been moving as much as US Treasuries. In fact, quoted rates will likely be the same as yesterday's in most cases, with the only difference being slightly higher upfront costs. That could change though. One of the reasons rates haven't been more volatile is the fact that the Brexit vote is seen as being fairly even. As soon as a clear victor emerges, rates could move swiftly. A "remain" vote could cause a much quicker move higher in rates on Friday morning. Between now and then, volatility might be subdued, but major improvements are less likely.
Loan Originator Perspective
"Another day in the red, and a slight move higher on Treasury yields poses the question if this is a breather or a correction in rates. It's always hard to tell in the midst of the action, but it's safe to say that locking in and avoiding the volatility is the safe bet. Rates remain in a great range albeit worse from last week, it's still a great time to lock in. Thursday's vote in England is too high risk of an event to float into, especially for loans closing in the next few weeks. " -Constantine Floropoulos, VP, The Federal Savings Bank
"Global markets continued their recovery from Brexit Anxiety today, and bond markets sold off again. It's hardly surprising that these rate dips are fleeting, we see the same pattern virtually every time rates hit multi-year lows. For now, we're back to a "no trend" pattern, but sure feels like we're closer to rising rates than falling. I'm locking loans early in almost all cases." -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.5% - 3.625%
- FHA/VA - 3.25%-3.5%
- 15 YEAR FIXED - 2.75-2.875%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- Markets had been primarily concerned with the timing of the Fed's second rate hike (after they first hiked in December 2015)
- The possibility that the U.K. would vote to exit the European Union (Brexit) has since taken over as the biggest flashpoint for markets.
- The Fed freely admits it didn't hike in June because of this and because it wants to be sure that jobs numbers aren't taking a bigger turn for the worse. Mortgage rates moved farther into 3-year lows as a result.
- If the UK votes to remain in the EU and if the next jobs report is strong, watch out. Between now and then, volatility will be elevated and improvements in rates will be slow in coming (which is always the case when we're at long-term lows). These have historically been good opportunities to lock, despite the longer term momentum remaining positive.
- 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).