July 15, 2016
Mortgage rates have been moving higher, in general, this week. That upward momentum tends to coincide with weakness in broader bond markets. For instance, when yields on US Treasuries are moving higher, mortgage rates usually are as well. That's no surprise considering the bonds that underlie mortgages (MBS) are well-correlated with Treasuries. But what IS a surprise is that rates held steady today even as bond markets suggested a move higher. Granted, we've seen more of this behavior lately where lenders won't adjust their rates right away to match the market, but today seemed to defy a bit more logic than other recent examples.
While today's surprisingly steady rates are a welcome sight, that alone isn't enough to defeat the negative trends set in motion this week. The concern is that early July marked long-term lows for mortgage rates (and all-time lows for most government debt yields) and that we're now moving higher. Such a move higher is a normal part of larger moves lower, provided it doesn't go too far. At the moment, we're waiting to see how far it goes.
Loan Originator Perspective
The vast majority of my clients have locked. For the couple who ratified late this week, I'm comfortable with floating them over the weekend. The losses we've seen over the past couple of days have done their damage. All of my floaters were qualified at higher rates, so this is gravy for them. One client insisted on locking today, and I'm happy to take the unease of floating off the table for them. -Matt Hodges, Charlottesville Sales Manager, Presidential Mortgage Group
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).