September 15, 2016
Mortgage Rates were unchanged in most cases today, keeping them near their highest levels in more than 2 months. Rates are driven primarily by movements in bond markets, and bonds had an opportunity to react to multiple economic reports that came out this morning. The headliner--Retail Sales--missed estimates calling for a 0.1 percent decline, instead sliding by 0.3 percent. This would generally be good for rates, but several other reports were stronger than expected, leaving bonds to trade in the same range as yesterday after brief volatility in the morning.
The most prevalent conventional 30yr fixed rate quotes are still an eighth of a point higher than they were last week, with top tier scenarios most likely to be quoted 3.5%. That said, in cases where a quote is .125% higher (e.g. 3.5% this week vs 3.375% last week), points should be slightly lower (or lender credit slightly higher, depending on the scenario). In other words, the total damage from the past few days falls just a bit shy of a full eighth of a percentage point in rates.
Despite today's relative calm, the potential for volatility remains elevated. This will continue to be the case at least through next week's Fed meeting on Wednesday.
Loan Originator Perspective
The recent pop higher on interest rates has left a lot of us wondering what's next. From a technical stance, we are poised to move even higher. From a fundamental perspective, we are probably right in the sweet spot. From a risk perspective, we are shadowed by a looming rate hike, and foreign & domestic economic data that we cannot foresee. If you missed the boat last week to lock, and have 45-60 days to test the markets' acceptance of higher rates, I recommend floating. Inside of this timetable, it is way too risky to make the call. Interest rates always move up quickly, and unpredictably in many cases. A move down would require some fresh new data or event of a negative economic picture. The question is, are you willing to see your rate move an additional .25-.50% higher??? At this point defense wins games. -Gus Floropoulos, VP, The Federal Savings Bank
Today's Best-Execution Rates
- 30YR FIXED - 3.5%
- FHA/VA - 3.0 - 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).