Mortgage Rates Back to 3.5% for Some.

If you have a truly ideal credit profile and loan scenario, a few of the more aggressive lenders are quoting conforming, 30yr fixed mortgage rates at 3.5% today.  Almost all other lenders are only an eighth of a point higher at 3.625% for top tier scenarios.  This is a rate landscape that hasn't been seen since early May 2013.  There's still quite a bit of ground to cover between here and the 3.125%-3.25% rates seen at the end of September 2012, but for all intents and purposes, 3.5%-3.625% was the upper end of the refi boom golden age from mid 2012 to mid 2013.  

Today finally brought meaningful market events into the mix whereas the first two days of the week lacked inspiration.  As you might guess, that inspiration was positive for rates.  Retail Sales data came in much weaker than expected.  This is one of the more important reports each month.  When economic data is weak, bond markets tend to benefit, and the mortgage-backed-securities that dictate rates are part of the bond market.  

In addition to Retail Sales, positive overnight developments in Europe also played a key role.  Essentially, a long-awaited assessment of the European Central Bank's (ECB) bond buying program from Europe's highest court indicated that the ECB was within its right to undertake such a program.  The implication is that this lowers the barriers to additional easing measures expected to be announced some time in the next two months. 

The big question of the day is whether or not the good times will continue for rates.  In a word, yes.  But as has been the case for nearly a year now, the good times will only continue until European growth and stability concerns turn a meaningful corner.  That's not the sort of thing that will happen in a day or that would be able to be identified in real time.  So there will be a period of conjecture when the time comes.  All we can know is that we're not there yet.  That said, we also know there can and will be head-fakes back toward higher rates even while the broader trend is positive/lower.

Loan Originator Perspective

"Floaters rejoice, lender rate sheets dramatically better than yesterday. Without a doubt, short term closings should lock with today's improved pricing. Consumers closing within 30 days should also consider locking. When pricing rallies, it isn't uncommon to see a pull back over the next few days. Any consumers closing in more than 30 days, i would continue to float." -Victor Burek, Open Mortgage

"Mortgage rates improved again today, but my sentiments remain the same....Lock at the lowest levels in 2 years. If rates improve drastically, float down your locked rate with your lender...if not, you'll be glad you locked. If you're weighing the odds, the odds are in favor of rates rising before they move lower...if they move lower, at all." -Brent Borcherding, brentborcherding.com

"Can you say VOLATILITY!!! Stocks and bonds were all over the map today with large price swings. Bonds advanced in early trading but did not hold on to their gains. We could see rates level off before they resume their down trend. I do believe they will continue to decrease for it is looking more and more likely Europe will start their own version of quantitative easing. Should this come to fruition we may see out own yields decrease thus bringing down home loan rates. From a timing perspective if you are closing in the coming week or 2 lock in today. If you have time on your side I would continue to float as long as you can stomach some volatility." -Manny Gomes, Branch Manager Norcom Mortgage

"We’re now closing in on the low rates of 2011, 2012, and early 2013. This could be the chance for those that missed the last refi boom to finally make their move. Home purchasers will also benefit with more purchasing power. The rally had been largely driven by forces outside of domestic economic data to date, but the U.S. retail sales report from December is adding fuel as well. Floating has paid off recently and could still do so, but in my opinion, it’s hard not to take the risk of a reversal off the table and lock. Rate negotiation is always possible if the drop continues" -Michael Owens, Vice President of Mortgage Lending, Guaranteed Rate

Today's Best-Execution Rates

• 30YR FIXED - 3.625-3.75
  
• FHA/VA - 3.25
  
• 15 YEAR FIXED -  3.0-3.125
  
• 5 YEAR ARMS -  3.0 - 3.50% depending on the lender

Ongoing Lock/Float Considerations

• 2015 began with a strong move to the lowest rates seen since May 2013.  The catalyst has been and continues to be Europe.
  
  
• European bond yields trended constantly lower in 2014, thus playing a prominent role in keeping US rates lower than they otherwise might be.  Many feel that Europe will continue to slide until their central bank engages in US-style quantitative easing.  Some see this happening in early 2015.  In any event, we're looking for a turn in Europe, first and foremost, before worrying about the longer-term trend in bond markets being at serious risk of reversing.
  

• It's impossible to know when Europe will turn a corner, and even then it's only the sort of thing we'll be able to observe in hindsight.  That means every head-fake toward higher rates runs the risk of developing into a longer term rise, even if those risks vary greatly in terms of probability.  Clients with longer term time horizons and who otherwise don't mind losing some ground in exchange for the chance at locking even lower rates are the only ones who should float.  Clients who must close by a certain date or who can't afford to lose any ground on rates should generally be locking even though the longer term trend has been in their favor for over a year now.
  
  
• 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).