Mortgage Rates Inch Lower to End March; Volatility Ahead

Mortgage rates fell again today extending a 3 day winning streak after shooting abruptly higher in the middle of last week.  That damage hasn't been completely undone yet, and we shouldn't expect it to be, given that underlying trading levels in bond markets have yet to make it back to the stronger levels seen last Tuesday.  In addition, it's the nature of the mortgage market for rates to move up more abruptly than they move down. 

3.75% remains the most prevalently-quoted conventional 30yr fixed rate for top tier scenarios.  Most of the lenders that moved up to 3.875% with last week's spike are now back down to 3.75% and a few of the most aggressive lenders are offering 3.625%, but the vast majority are at 3.75%.

Markets have been largely preoccupied with the month/quarter end trading process.  While traders typically react to news and economic data, there are other reasons to move money beyond the the direction of the economy.  Many investors are tasked with investing according to the decisions of their clients.  Month-end, and especially quarter-end are busier times for this sort of housekeeping trading.  

Even so, the morning's economic data managed to create volatility, but it was subdued compared to what it might have been if not for the month/quarter-end environment.  Naturally, with tomorrow marking the beginning of a new month, traders will have more liberty to react to the regular set of inputs.  Incidentally, those inputs increase in importance, meaning there is an exceptionally wide range of possibilities tomorrow, for better or worse.

Loan Originator Perspective

"Month/Quarter end has been positive for bonds, but the gains have not been substantial. Lender rate sheets are slightly improved today. A new month and jobs data begins tomorrow which has me on the defensive side. The trend has been for rates to worsen heading into the non farm payrolls report which will be released on Friday. With today's modest gains, i think it would be wise to lock in. " -Victor Burek, Open Mortgage

"Just as the college basketball world has their big event coming up in the form of this weekends Final Four, we have ours coming up on Friday with the NFP jobs report. After getting through Monday and Tuesday's relatively quiet month end gyrations and activitities things pick up starting tomorrow the the ADP jobs # and the ISM report. Jobless claims on Thursday could, but may not, add to any volatility/positioning ahead of Friday's jobs report. As the Fed is now saying they're more data dependent on when to raise rates I'd think a defensive approach may be prudent as far as your lock/float decisions go. And most definitely if you're closing soon. The rest of the week should be interesting." -Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC

Today's Best-Execution Rates

• 30YR FIXED - 3.75
  
• FHA/VA - 3.5
  
• 15 YEAR FIXED - 3.125
  
• 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

• 2015 began with a strong move to the lowest rates seen since May 2013.  The catalyst was Europe and the introduction of European quantitative easing.
  
  
• With European QE having now begun, we're on high alert for a big picture bounce in European economic data, sentiment, growth, and rates.  The more it looks like such a bounce is taking hold, the greater the risk that domestic bond markets and mortgage rates will also experience a big bounce higher.  There was a possibility that the bounce occurred in February, but European bonds got back to the task of improving in March.  This has helped calm the domestic bond market's move toward higher rates.
  

• While more immediate, bigger-picture disaster has been averted, it's still a highly uncertain time for global financial markets.  On the one hand, some believe we're in the midst of a race among world central banks to devalue currencies and lower interest rates.  Others believe that the global economy is turning a corner and rates will grind higher.  That creates a lot of volatility, and volatility is bad for mortgage rates.  One result is that they have a slightly harder time keeping pace with movement in Treasuries.  That can be good or bad, depending on which way markets are moving.  The other result is that there really is no way to be sure that today's rates will be available a few hours from now.  They could get better or worse, but the point is that there's more change and movement in the mortgage market so far in 2015.
  
  
• 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).