August 4, 2016
Mortgage rates were moderately lower today, keeping them well-within the dominant range of the past 2-3 weeks. Compared to yesterday, lenders would be just slightly more likely to quote 3.375% on top tier conventional 30yr fixed scenarios compared to 3.5%, but both rates have equally prevalent in general.
Today's improvement came courtesy of a policy announcement from the Bank of England (BOE). Naturally, the BOE is not in charge of mortgage rates in the US. Even the Federal Reserve can't quite make that claim. But... The actions of the world's biggest central banks are the most important factors when it comes to general momentum in interest rates around the world. Simply put, the BOE said it will be buying more bonds than expected. More bond buying results in lower rates--all other things being equal.
The actions of the Federal Reserve are much more important to domestic interest rates, including mortgages. The Fed (and the rest of the world, for that matter) will get an important piece of economic data tomorrow morning in the form of the Employment Situation (aka the "jobs report," NFP, or "nonfarm payrolls"). If it's super strong, expectations could increase for a Fed rate hike at the September meeting. Increasing rate hike expectations typically push mortgage rates higher. Things could go the other way if the jobs data is weaker. It's also possible that the data comes out like a warm bowl of porridge and we see very little movement, but it's good to remember that volatile reactions--for better or worse--are more likely following the big jobs report.
Loan Originator Perspective
Bonds posted somewhat surprising gains today, as the BOE cut Britain's prime rate and commented that additional fiscal easing might be necessary. With NFP looming tomorrow, current pricing is quite appealing, particularly for those within 30 days of closing. My pricing improved about 25 bps from yesterday's, a significant amount. Floating through today means one of two things: you feel NFP will not match June's stellar report and/or you have time before closing to recoup any pricing setbacks caused by a strong report. Tough call if you're a month from closing, it's really a coin flip in my eyes. -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).