July 25, 2016
Mortgage rates were unchanged again today, making three out of the past 4 days where rates haven't budged and 6 out of the past 7 days where rates moved by 0.01% or less, on average. That's an exceptionally narrow range, and it speaks to indecision in financial markets ahead of this week's major central bank announcements. That's where the Fed and the Bank of Japan give the official word on their monetary policy, which includes setting short term rates and spelling out various stimulus efforts.
The Fed isn't expected to hike rates this week, but chances increase as the year progresses. As such, it wouldn't be a surprise to see this week's announcement telegraph their intentions for the coming announcements. Although the Fed's policy rate does not directly control mortgage rates, there is typically upward pressure on all interest rates if Fed rate hike expectations increase.
In terms of specific levels, the average conventional 30yr fixed quote moved up to 3.5% for top tier scenarios late last week. Quite a few lenders are still quoting 3.375%, while just a few are up to 3.625%. Keep in mind, "top tier" means there are absolutely no "hits" to loan pricing (i.e. 25% equity, 760+ credit score, etc). Most loans in the real world have some hits (or adjustments to the 'perfect' pricing), meaning that a lot of 3.625-3.75% rates are being quoted. We track the top tier rate because that's the easiest way to capture the true day-over-day movement (especially considering the effect of certain adjustments has varied over time, and to some extent, between lenders).
Loan Originator Perspective
Rates might finally get some motivation to move this week. For about the last 2 weeks, the benchmark 10 year note has traded in a pretty narrow range from the mid 1.50's to 1.60. It seems traders are waiting on something and that something might just be the FOMC announcement on Wednesday. I would not be surprised to see us challenge the top of the range between now and then. That said, I don't see much to be gained from floating, so locking is the safe call for now. -Victor Burek, Churchill Mortgage
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).