Mortgage Rates Slightly Higher Ahead of Fed Minutes

Mortgage Rates were sideways to slightly higher today, depending on the lender.  Several lenders issued mid-day reprices as bond yields moved higher throughout the day.  Lenders who didn't reprice will begin tomorrow with slightly higher rates, all other things being equal.  In other words, the underlying bond market deteriorated, but not enough for every lender to adjust rates in the middle of the day.  Instead, that deterioration will be reflected in tomorrow morning's rate sheets unless bond markets happen to bounce back (toward lower yields) overnight or early tomorrow morning.

Tomorrow's biggest source of potential volatility is the release of the minutes from the most recent Fed meeting at 2pm ET.  This gives investors a chance to examine the Fed's discussion leading up to the late July policy announcement in greater detail.  At the moment, everyone is looking for clues about the Fed's thoughts on hiking rates at the September or December meeting.  If the Minutes make it seem like September is more likely, rates could easily continue higher tomorrow.

All that having been said, recent rate movement has been minimal.  The range has been quite narrow, with conventional 30yr fixed quotes of 3.5-3.625% marking the "bad times" over the past month and rates of 3.375-3.5% marking the better times.  Today leaves us right in the middle of those two zones with the average lender quoting 3.5%, though there is activity at 3.375% and 3.625% as well. 

Loan Originator Perspectives

Bond markets continued yesterday's losses today, and treasury yields hit 1.58%, near the top of our recent range.  Two things can happen from here:  we rally back towards the low end of the range, or yields break higher and rates rise.  I'll hope for the first and prepare for the second.  Bulk of my pipeline is locked, particularly all price sensitive deals.  We need to tread carefully here. -Ted Rood, Senior Originator

Today's Best-Execution Rates

• 30YR FIXED - 3.5%
• FHA/VA - 3.0 - 3.25%
• 15 YEAR FIXED - 2.75%
  
• 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

• In the biggest of pictures, "global growth concerns" remain the driving force behind the long-term trend toward lower rates

• Amid that trend, periodic corrections toward higher rates can and will happen.  These can happen for no apparent reason, or they can be brought on by changes in expectations surrounding central bank policy at home and abroad, as well as geopolitical and systemic risks
  
  
• Time horizon and risk tolerance are 2 variables to consider when it comes to locking.  If you have plenty of time and don't mind losing some ground, set a limit as to how much higher rates could go before you'd lock to avoid further losses, and then float in the hopes of never seeing that limit.
   
• In the shorter-term, it's always good to look for lock opportunities after rates have been moving lower or sideways repeatedly, especially if they've since begun to move back up in any sort of consistent way. 
   
• 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).