September 7, 2016
Mortgage Rates moved lower today at a slightly better pace than the recent norm. That's not saying much in the bigger picture, because "the norm" has been almost zero movement in either direction for several weeks. Such a narrow range makes it possible to move from the high end to the low end with relatively little effort, and that's exactly the case today. In fact, you'd have to go back nearly a month to see rates any lower, even though the highest rates of the past month might be exactly the same, depending on the lender.
How can the lowest rates be the same as the highest rates?
It's a semantics issue, really. When we talk about "rates," we're referring to the cost associated with financing a home purchase or refinance. Almost all lenders offer rates in 0.125% increments, but markets rarely move enough in one day for a mortgage quote to change by 0.125%. Instead, the upfront lender fees (origination, discount, etc.) provide the fine tuning adjustment that helps "rates" keep pace with market movements. For instance, a quoted interest rate of 3.5% with $850 in upfront lender fees would technically be a "lower rate" than a 3.5% interest rate with $1000 in upfront lender fees.
After a few of those fine-tuning adjustments, the rate itself could move down. We're seeing this to some extent now. Rate quotes on top tier conventional 30yr fixed scenarios had been fairly evenly split between 3.375% and 3.5%. Over the past few days, 3.375% is taking the lead, and a few of the more aggressive lenders are once again quoting 3.25%.
Loan Originator Perspectives
Since the payrolls data on Friday, I have favored floating and I continue to favor floating for now. MBS are almost back to the best levels of the year, but rate sheets are not as close. The longer MBS hold current levels, the more likely secondary departments will pass along the gains. So I favor floating overnight and evaluating pricing in the morning. -Victor Burek, Churchill Mortgage
Bonds held yesterday's gains today, and my rate sheets improved slightly. We're still "in range", but the odds of Fed hiking rates at their September meeting have dropped considerably. Who knows how/if tomorrow's ECB statement will impact us, my hunch is any affect will be minimal. I locked several loans today, as current pricing is near best of the year. Floaters need to be realistic regarding the gains they're hoping for. Hoping rates improve .125% may work, hoping they improve .5%, not so much. -Ted Rood, Senior Originator
Today's Best-Execution Rates
- 30YR FIXED - 3.375 - 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).