Flat Mortgage Rates Meet Big Potential Volatility

By: Matthew Graham •

Mortgage Rates were unchanged, yet again, keeping alive an uncanny streak of lifelessness.  That COULD change tomorrow after Fed Chair Yellen's speech at the Jackson Hole symposium, but please note the emphasized word.  This is always the case when it comes to big potential market movers.  They can be thought of as "reserving the right" to push rates quickly higher or lower, but they don't always exercise that right.  

At the moment, markets--especially those for interest rates--have been so devoid of movement that investors are increasingly anxious about the eventual return of volatility.  Yellen's speech tomorrow is simply the most obvious source of inspiration on the near-term calendar.  If it doesn't do the trick, investors will move on to next week's busy slate of economic data.  Either way, it's important to know that the risk of movement is bigger tomorrow than on any recent occasion.  If you'd rather not take that risk, locking makes good sense.  

 See Rates from Lenders in Your Area


Loan Originator Perspectives

Tomorrow's Fed speech might be a market mover, and it might not.   If it is, it's more likely to push rates higher. I can't see the Fed chairwoman saying things that would indicate a weakening economy enough to actually push rates much lower. Think about it, we're only a .25% higher from the Brexit lows......we would need a tremendous negative headline for markets to turn defensive. With all that said, the current range is a great locking point for rates. Anything closing in 30 days is locked over on this side.   -Constantine Floropoulos, VP, The Federal Savings Bank

The much awaited Yellen speech at Jackson Hole happens tomorrow morning.  It could move rates, but it could also be a dud.  With where rates are now, I think you have more to risk then to gain by floating.  So I favor locking ahead of her speech. -Victor Burek, Churchill Mortgage

In a stunning move, rates were unchanged today.  Well, not really stunning, given that they've been within a 30 bps range for the last month.  Tomorrow gets interesting, as Chairwoman Yellen makes her remarks from the Jackson Hole Economic Summit.  The more economically bullish she is, the more rates will rise.  If she is as equivocal as most Fed statements, we may stay flat, but my hunch is she'll include enough positive rhetoric to convince markets a rate hike is nearing.  That's far more likely than her citing economic weakness, which would help rates.  Time to lock, unless you really like "action" and adrenaline is your drug of choice. -Ted Rood, Senior Originator


Today's Best-Execution Rates

  • 30YR FIXED - 3.375 - 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).