Mortgage Rates Modestly Lower as Risks Increase

Mortgage rates had their 2nd straight day of improvements today--something that's been uncommon since the beginning of May.  Additionally, the slight drop in rates was belied by the market movement.  The bond markets that inform lenders rate sheets actually pointed to higher rates by the end of the day.  That means the improvements were more to do with the overhang from yesterday's strength.  In other words, yesterday's underlying market conditions were so strong, and so abrupt, that lenders couldn't fully price them into rate sheets.  That left some additional room to lower rates today despite the counter-arguments being made in bond markets.

The most prevalently-quoted conventional 30yr fixed rate for top tier scenarios remains at 4.125%.  A few lenders are on either side of that by an eighth of a point, but they're in the minority. 

The next 2 days are critical, relatively speaking.  Reason being: Monday set us up for a chance at breaking toward lower rates if momentum can be maintained.  At first, it looked like rates might react more to the situation in Greece than they actually did.  As I've continued to caution, Greece is only one medium-sized brush-stroke in a much larger painting.  The bigger, more colorful strokes will come from things like the employment data on Thursday (a day early due to the Independence Day holiday).  If the numbers are stronger than expected, this recent foray toward lower rates may take an abrupt turn.  Either way, we still haven't seen an aggressive enough push lower to rule out the long term trend toward higher rates.

Loan Originator Perspective

"Well, bonds hit a brick wall today, and we failed to break 2.30 on treasuries despite continued Greek Drama. While the last few days' gains have been nice, this rally may be tiring rapidly. Today represents a great opportunity for floating borrowers to lock, those who don't are really rolling the dice. I'd advise all borrowers closing within 30 days (and most of those who aren't!) to lock while the getting is good." -Ted Rood, Senior Originator

"I am continuing with my same advice and advising to lock at application. The outlook on the US economy and rate hikes has not changed despite the issues in the Eurozone. Way too risky to float this market." -Victor Burek, Open Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 4.125%
  
• FHA/VA - 3.75-4.0
  
• 15 YEAR FIXED - 3.375%
  
• 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.  There is much debate over whether or not the global economy is turning a corner, thus justifying a widespread move to higher rates.  That's made 2015 significantly more volatile than 2014 for markets.  This means lender rate sheets may change appreciably from day to day, and sometimes even several times in the same day.
  

• Bottom line: European Quantitative Easing helped push global rates to all-time lows in April.  Now, the big risk for mortgage rate watchers is that we might have turned a long term corner.  That risk is being compounded by speculation about the Federal Reserve raising rates by the end of 2015.
  
  
• May and June have amounted to the 2nd major move higher bounce so far this year.  Every time this happens, we have to consider 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. 
  
  
• 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).