Mortgage Rates Still Not Fully Committed to Recovery

By: Matthew Graham •

Mortgage rates moved sideways-to-slightly lower in most cases today, but only after underlying bond markets fought back from morning weakness.  Before that, most lenders were offering slightly higher rates than yesterday, though the differences would be seen in the form of closing costs as opposed to in the rate itself.  4.0% remains the most prevalent conventional 30yr fixed quote for top tier scenarios.  This has been a line in the sand, blocking rates from a more substantial recovery after they spiked in early May.

An old friend (of mortgage rates) was in the news today, but not in a very friendly capacity today.  Rumors regarding a potential Greek debt restructuring circulated just before 10am.  Although the news didn't really pass the smell test, investors nonetheless moved some money out of safe haven bond markets and into Greece (they'd later learn to trust their noses).  The two biggest safe havens are the US and Germany.  When  investors move money out of those markets, prices fall and rates rise. 

 See Rates from Lenders in Your Area

US bond markets were also slightly weaker than they otherwise might be due to preparations for this afternoon's 5yr Note Auction.  Weakness in US Treasuries almost always coincides with weakness in the mortgage-backed-securities (MBS) that dictate mortgage rates.  Today was no exception and lender rate sheets remained slightly more conservative as a result.  After the auction, and after the Greece headlines were relatively debunked, bond markets recovered, and many lenders adjusted rate sheets accordingly.


Loan Originator Perspective

"So far, the third time challenging 2.14 hasn't been the charm, yet. The benchmark 10 year note was unable to hold below 2.14 thanks to some headlines out of Greece that were later determined to be inaccurate. Greek official said a deal was close at hand, but later German official denied a deal was close. It's amazing how unconfirmed headlines can move the markets which always makes floating risky as you cannot plan for them. Tomorrow we have our final auction of the week and it is end of month, both of which are supportive of bonds. As long as you can afford to be wrong, i think i would continue to float." -Victor Burek, Open Mortgage

"Rates treaded water today, and my rate sheets were very close to yesterday's. Some rumors regarding Greece's debt woes impacted bond markets slightly, but not enough to alter pricing. For now, I'm pretty neutral on locking, as long as floating clients understand that rates can go UP as well as down!" -Ted Rood, Senior Originator


Today's Best-Execution Rates

  • 30YR FIXED - 4.00%
  • FHA/VA - 3.75
  • 15 YEAR FIXED - 3.125-3.25
  • 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.

  • 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 had been creating a lot of volatility, which made for uncertain fluctuations from day to day.  But those periods of volatility have been interspersed by utter indecision where rates are effectively drifting sideways with no conviction and no desire to get off the fence.
  • 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.   Those risks are being compounded by speculation about the Federal Reserve raising rates by the end of 2015.

  • We're in the middle of the 2nd big, ugly bounce so far this year and once again forced to confront the possibility that this will be a big-picture, long-lasting correction.  Until such a thing can be ruled out, Locking makes far more sense.  That said, the upward momentum in rates during this move has subsided to such an extent that we can say markets are considering their next move. 

  • 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).