Mortgage Rates Hit High 3's

Mortgage rates continued living the dream today, falling decisively past last week's lows to claim another instance of "best rates since June 2013."  Today's move was exceptional compared to last week's (or just about any other move lower of 2014 for that matter).  After heading into the weekend in relatively conservative territory, the bond markets that underlie mortgages were greeted with massive movement in broader financial markets over the 3-day weekend.

Some of that movement took place late on Friday--too late for rate sheets to experience much benefit--but most of it occurred in global bond markets during Asian and European trading overnight.  Motivation varies depending who you ask, but the concept of "global growth concerns" is the common thread running through most of the reasons offered for the drop in rates. 

Last week's best moments saw the most prevalently-quoted conforming 30yr fixed rates hover between 4.0 and 4.125% for top tier borrowers.  Today's rates all but eliminated 4.125% from that list.  In fact, 3.875% would now be more common than 4.125% (assuming a flawless loan file, 75% or lower Loan-to-Value, and a competitive lender).  Rates haven't been any lower since the first half of June 2013.

Loan Originator Perspective

"As mentioned last week, these rallies tend to go well overboard before the change of course is determined. I'm a believer in booking gains as they come, but this recent unprecedented bullishness I believe will continue into the foreseeable future. Only locking loans that are cleared to close." -Constantine Floropoulos, Quontic Bank

"Lenders have yet to pass along all the gains that could/should have been realized at these levels. I personally think that floating cautiously, is a good option at this level, because simply maintaining Treasury and MBS prices at this level will lead to better rates for consumers." -Brent Borcherding, brentborcherding.com

"It appears both equity and bond markets are anticipating global economic slowdowns, and MBS prices are at their highest levels in over a year. It can take a while for those levels to fully translate to lenders' rate sheets. Until the downward rate trend reverses, it's tempting for borrowers starting their loans to float. Those closer to closing may want to grab current pricing, nothing wrong with locking up a great rate while the getting is good. All in all, wonderful time to be a borrower, less than exciting time to be an equities investor!" -Ted Rood, Senior Loan Originator

"Best rates in almost a year and a half. If you are looking for a mortgage, now is the time to move on it. No one knows where rates will go in the short term, but most agree that long term rates will be higher." -Kent Mikkola, Mortgage Consultant NMLS #353976, M & M Mortgage, LLC NMLS#213677

"There is an old saying which goes "the trend is your friend". I only agree with this when the trend is towards lower rates and luckily that is what we have been seeing. I think this trend will continue and rates have further to drop. That being said float and keep floating until the trend changes." -Manny Gomes, Branch Manager, Norcom Mortgage

"Hopefully you followed the advice of many to float over the long weekend. Today's pricing is the best we have seen in quite some time. Treasury yields continue to fall, taking MBS and mortgage rates with them. It appears the continued deceleration of Europes economy being the main cause. I do think this trend will continue so my approach with clients is to float until they are within 15 days of closing, then locking. " -Victor Burek, Open Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 3.875-4.0
  
• FHA/VA - 3.375-3.75
  
• 15 YEAR FIXED -  3.125 - 3.25
  
• 5 YEAR ARMS -  3.0 - 3.50% depending on the lender

Ongoing Lock/Float Considerations

• The hallmark of 2014 has been a narrow range in rates.  Too many market participants bet on rates going higher in 2014, and markets punished that imbalance with a paradoxical move lower.
  
  
• European markets helped that process along and continue to play a prominent role in keeping US rates lower than they otherwise might be.  

• For most of the Summer and early Fall months, rates held a narrow range of 4.125% -4.25% (essentially where the 2014 rate recovery has bottomed out) and finally broke to a 3.875%-4.0% range in mid-October.  It's too soon to tell if this is a brief window of opportunity or the continuation of 2014's very gradual improvements.
  
  
• 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, 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).