July 12, 2016
Mortgage rates are on the move, heading noticeably higher after a more subtle increase yesterday. With that, this week now stands as the first major push back against the impressive run to near-record lows that's taken place since the UK voted to leave the European Union in late June. Whereas lenders had increasingly been quoting 3.25% on top tier 30yr fixed scenarios, most have moved back up to 3.375%. Some of the more conservatively-priced crowd is even higher.
This is a battleground for mortgage rates at the moment, and it corresponds to levels in 10yr Treasury yields (even though rates are definitely NOT moving in lock step with Treasuries these days). Still, the mid 1.5% territory in 10yr yields is a bit of an inflection point for the overall rate market, and general trends in the overall rate market will influence the direction of mortgage rates.
If 10yr yields move much above 1.53, it would be taken by many as a sign of more weakness to come (read: higher rates). Conversely, if rates happen to hold their ground and move lower tomorrow, it would be a strong sign of commitment to the general range surrounding these long-term lows.
Loan Originator Perspective
"Rates took a little beating the last couple days. With our final auction of the week tomorrow, and pretty good support just above current levels, I would float overnight. The tide always has to go out, before it can come back in." -Victor Burek, Churchill Mortgage
"Over the past couple of days, I've pretty much locked my pipeline up, as treasuries sold off dramatically. We haven't lost too much ground yet on MBS, but that could change. The long term downward trend is still intact, but the short term trend is upwards. In my mind, nothing wrong with locking at these levels, unless you want to call the market's move up a bluff. I'm playing with house money, taking some chips off the table, putting them in my borrowers' pockets." - Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.375%
- FHA/VA - 3.25%
- 15 YEAR FIXED - 2.75%
- 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.
- Brexit happened and rates rejoiced. Lock if you like what you see. The longer term trend remains positive regardless, but periodic corrections toward higher rates continue to be a risk.
- 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).