Mortgage Rates Slowly Approach July Lows

Mortgage rates continued the recent trend of very small improvements today.  Most lenders are essentially unchanged, and while a few rate sheets were higher than yesterday's, they were the exception.  The average improvement was so small that it would have no effect on the contract rate in most cases.  That means closing costs would be just slightly lower for the same rates quoted yesterday.  While some of the most aggressive lenders are back to quoting conventional 30yr fixed rates of 4.0%, most remain at 4.125%.  Relative to the sharper drop in rates earlier this month, today's aren't quite as low, but it would only take another day or two of modest improvement to get there.

It's notable that we can now talk about potential future scenarios that include "modest improvement.  Until just recently, the default gameplan when it came to rate strategy had been "duck and cover."  There have been some close calls in the past 3 weeks.  These would be those instances where rates quickly approached 2015's highs set in early June.  But each time that happened, we've held our ground admirably.  That's been a consistent enough theme that we can now consider the potential that 2015's longer-term uptrend in rates is now leveling off.  Bottom line: instead of simply fearing the next break higher in rates, now we can entertain that the next break could be in either direction.

Loan Originator Perspective

"More muted gains today, as rates improved slightly. We're still chasing early July's pricing, but at least the short term (slow) trend is in our favor. I priced a loan yesterday, and overnight we gained 32 bps on it. Locking is the safe bet, but can't fault those with risk tolerance who cautiously float." -Ted Rood, Senior Originator

"Mortgage Rates remained the same today, and in some cases you may have even seen some slight improvement. I've been advocating floating, and that has paid off every day this week. While I'm not particularly concerned about rates rising on a larger/long term basis, my day to day guidance is moving towards locking. If you've floated the last 5 business days, you've likely saved yourself thousands of dollars, so I think locking is a good idea." -Brent Borcherding, brentborcherding.com

Today's Best-Execution Rates

• 30YR FIXED - 4.125%
  
• FHA/VA - 3.75-4.0
  
• 15 YEAR FIXED - 3.25%-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.  July has thus far provided an opportunity to consider such a big-picture correction might be on hold. 
  
  
• 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).