Mortgage Rates Pushing Important Boundary

By: Matthew Graham •

Mortgage rates continued farther into to the highest levels since early February today.  The current territory is important in the bigger picture, as it has historically acted as a line in the sand between the lowest rate range and everything else.  This refers to conventional 30yr fixed mortgage rates between 3.375% and 3.625%. The analogous 10yr Treasury yield would be 1.84% and below.  

With that in mind, 10yr Treasury yields ended the day at 1.84% and today's most prevalent conventional 30yr fixed rate quote is right on the edge of a move back up to 3.75% after a stable run at 3.625%.  The longer term rate considerations are coming to a head right as we approach the biggest events on this, the biggest week of the month.  Friday's jobs report is the most important event on the calendar, but markets don't always wait for Friday before putting their cards down.  This could be either good or bad for mortgage rates.  The point is that there is greater potential for a bigger move.

 See Rates from Lenders in Your Area


Loan Originator Perspective

"Our support at 1.84 on the benchmark 10 year note was tested this morning, but it is still holding. Following the strategy of float the highs, lock the lows, I continue to favor floating. As long as that support level holds, I would float and look to lock on the next dip. However, if that support breaks, rates could rise quickly so only float if you can afford to be wrong." -Victor Burek, Churchill Mortgage

"Mortgage Rates have been moving higher over the last week, and we are now at the high side of the recent range for the 10 yr. treasury, 1.84. If we break above, rates are likely to start moving drastically higher, but if we find support at this level...the only direction we can move is lower. I'd strongly consider floating, but I would definitely have my finger on the lock button in case 1.84 breaks." -Brent Borcherding, brentborcherding.com

"Rates trickled upward today, as ADP's February employment report beat expectations and markets pondered just how good/bad economic growth will be. Friday marks the release of February's NFP (non-farms payroll) report, and a strong number could definitely end our rally. My pipeline is locked, with the exception of new construction loans. We had a nice run in February, but those rates may soon be just a fond memory. If I wasn't locked already, I would be locking today." -Ted Rood, Senior Originator

"Floaters need to pay special attention to the market this week. Ten year yields are currently sitting at the absolute high end of the current range for treasuries yields from the past month; 1.84 to 1.69. If our range holds floaters will likely be rewarded as yields should fall back into the 1.7’s. If not then 1.84 could be the lowest yield we see for some time. This is a perfect example of risk vs. reward." -Jason B. Anker, Vice President- Loan Officer at Salem Five


Today's Best-Execution Rates

  • 30YR FIXED - 3.625 - 3.75%
  • FHA/VA - 3.25-3.5%
  • 15 YEAR FIXED - 3.00
  • 5 YEAR ARMS -  2.75 - 3.25% depending on the lender


Ongoing Lock/Float Considerations

  • The Fed finally hiked on December 16th, causing fears of rising rates in 2016.
  • But  global financial markets came into the new year in distress.  Now markets aren't even convinced that we'll see another Fed rate hike in 2016.  Major stock indices plummeted around the world, and investors sought shelter in the bond market.  When investor demand for bonds increases, rates fall.

  • We were left with much lower mortgage rates despite the Fed having just begun its hiking cycle.  This paradoxical trend can continue as long as global market turmoil fuels a demand for safer haven investments.  A big bounce in oil/stock prices could mean trouble for rates--at least temporarily.
     
  • As of March 1st, stock markets look like they're at least attempting to get back toward higher levels.  Mortgage rates have been pressured higher accordingly.  While we're well off the lows seen in early February, we're still in very low territory historically--low enough that it wouldn't make sense to second-guess a decision to lock, even though there's still a possibility that the longer-term trend toward lower rates could continue.
     
  • 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).