July 22, 2016
Mortgage rates didn't budge, compared to yesterday's, which leaves them in line with their highest levels since late June. A small majority lenders have moved up from quoting conventional 30yr fixed rates of 3.375% to 3.5% during the course of this week, and a several are already as high as 3.625% for top tier scenarios. That's about as stratified as it gets when it comes to each lenders' best possible rate on any given scenario. The stratification is a product of market volatility, all-time lows in benchmark rates (like US Treasuries) earlier this month, and varying lender strategies with respect to their business flow.
While it's good to be aware of the discrepancy in rate offerings, it's also good to remember that the "lowest rate" isn't always "the best deal." It certainly can be, but ultimately, the lender that gets the deal to the finish line as expected counts for a large part of the "value" equation.
Public service announcements aside, we're quickly approaching our next smattering of serious news. Next week's central bank announcements have the potential to kick off the next stint of 'momentum' in rates markets. In other words, rates could go from "generally flat" to "generally moving" in one direction or the other. It's probably a bit of a taller order for them to head back to all-time lows, so it makes more sense to guard against the possibility of the next move being higher, until it can be ruled out.
Loan Originator Perspective
Although we have ticked higher in the last few weeks on rates, pricing still remains very favorable. I still feel the recent move higher was purely a consolidation of the bigger move lower. Next week brings a bit more action that may sway the markets in a more favorable direction. Remember, the world's economic problems are not fixed, and the momentum is constantly pushing us toward lower rates. Borrowers with a time to spare can and should explore this possibility. Loans closing inside of 7-10 days are locked, no option there due to timeline restrictions, everything else I am floating through the weekend for now. -Gus Floropoulos, VP, The Federal Savings Bank
Another sedate day in securities today, appears the summer doldrums have set in. Nice to have that happen when rates are still near multi-year lows, borrowers and lenders have nothing to complain about. The biggest thing I remind clients is that while pricing varies somewhat between lenders, their knowledge, expertise, and dedication vary far more. Avoiding (or anticipating) potential concerns during the loan process is our biggest duty. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.5%
- FHA/VA - 3.25%
- 15 YEAR FIXED - 2.75%
- 5 YEAR ARMS - 2.75 - 3.25% depending on the lender
Ongoing Lock/Float Considerations
- In the biggest of pictures, "global growth concerns" remain the driving force behind the long-term trend toward lower rates
- Amid that trend, periodic corrections toward higher rates can and will happen. These can happen for no apparent reason, or they can be brought on by changes in expectations surrounding central bank policy at home and abroad, as well as geopolitical and systemic risks
- Time horizon and risk tolerance are 2 variables to consider when it comes to locking. If you have plenty of time and don't mind losing some ground, set a limit as to how much higher rates could go before you'd lock to avoid further losses, and then float in the hopes of never seeing that limit.
- In the shorter-term, it's always good to look for lock opportunities after rates have been moving lower or sideways repeatedly, especially if they've since begun to move back up in any sort of consistent way.
- 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).