Mortgage Rates Are Really Stuck in a Rut

By: Matthew Graham •

Mortgage rates barely budged yet again today despite more volatility in underlying financial markets.  This is the 3rd day in a row with similar behavior in interest rates, and part of an even broader trend of minimal movement since the beginning of the month.  If there was a detectable bias today, it was just microscopically higher in rate, but all lenders will still be quoting the same contract rates as yesterday.  Adjustments would be in the form of slightly higher upfront costs.  The most prevalently-quoted conventional 30yr fixed rate for top tier scenarios is 3.625%, though 3.75% is not far behind.

As we discussed yesterday, the longer we go without breaking below this current floor, the more it makes sense to favor locking.  Rates could move quite a bit higher without technically exiting the long-term trend lower.  There's a lot of room for movement between now and the FOMC Announcement on April 29th--the next event that stands the best chance to create more firmly-resolved momentum in rates markets.

 See Rates from Lenders in Your Area


Loan Originator Perspective

"So far in April mortgage rates have not found any directional legs to speak of.  Right now we are essentially right where we were at the beginning of the month.  Everyone is waiting for more definitive signals from Fed officials on the timing of an imminent rate hike but we continue to get a litany of mixed messages.  So, it's important to keep closely connected to your loan officer who is hopefully closely in tune with market events to provide guidance.  In the meantime, I would be locking short term closings (15 days or less) and cautiously floating anything beyond that." -Hugh W. Page, Mortgage Banker, SeacoastBank

 

Today's Best-Execution Rates

  • 30YR FIXED - 3.625-3.75%
  • FHA/VA - 3.25-3.5
  • 15 YEAR FIXED - 3.00-3.125
  • 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.
  • It's 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).