July 29, 2016
Mortgage rates enjoyed another strong day, falling to the best levels in exactly 2 weeks. Rates were actually set to move higher early this morning, but a much weaker-than-expected reading on Q2 GDP helped drive demand for bonds. Better buying pushes bond prices higher and rates lower. The strength in bond markets gave lenders the peace of mind needed in order to offer even better terms than yesterday. The most prevalent conventional 30yr fixed rate is quickly returning to 3.375% on top tier scenarios.
Next week brings important economic data, including the big jobs report on Friday. The overall tone of that data should help determine whether rates will continue building on the past 2 days of positive momentum. The conservative approach would be to lock in the gains with rates at 2-week lows. The aggressive approach would be to wait until we have clear evidence AGAINST the possibility that a new trend toward lower rates has begun. As of today, there is no such evidence, but it could come at any time.
Loan Originator Perspective
Rate sheets have shown solid improvements over the last couple days. The benchmark 10 year note has pushed below resistance at 1.51 which makes me lean toward favoring floating. however, today is month end and I am a bit concerned some of the rally today is based on that and we could lose some on Monday. Based on that, I would think wise to lock in any short term closings, but if closing in over 15 days, I would roll the dice over the weekend and float. -Victor Burek, Open Mortgage
Pricing remains to be very attractive and the recent move lower may cause for a bigger motivation to lock. I'm locking all loans on the block for closing in the next 2 weeks, leaving an option for those within 30 days, but floating anything with more time to close. Rates seem to want to creep lower. -Gus Floropoulos, VP, The Federal Savings Bank
Interest rates continue to challenge all time lows as we head into month end and a weak GDP report this morning is adding fuel to the rally. While I would never fault anyone for locking up and protecting these low rates we have now I certainly would be comfortable with any borrower floating and especially if their closing time was on a longer horizon. As always, however, we know things can change quickly so keep close to the speed dial button for your loan officer who is hopefully a well informed MBS Live member :) -Hugh W. Page, Mortgage Banker, SeacoastBank
Bonds continued their recent gains today, following more tepid US economic news. 10 year Treasury yields are currently 1.46%, exceptionally low by US standards, but a long ways from Japanese and some European bonds with negative yields. Since the trend is now towards lower rates, I don't see a huge incentive to lock, for folks with some time and risk tolerance, and IF their loan originator tracks MBS to anticipate future market movement. Close to closing? Sure not a bad time to lock, with pricing nearly back to Brexit levels. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.375-3.5%
- 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).