Mortgage Rates Battle Back From Recent Highs
Mortgage Rates were briefly at their highest levels in several weeks on Friday afternoon. This followed comments from the Fed's Jackson Hole symposium. Markets interpreted those comments as the Fed being more likely to hike rates in 2016--possibly even twice! While mortgage rates are based on MBS (mortgage-backed-securities), as opposed to the Fed Funds Rate (the thing the Fed is talking about hiking), if investors think the Fed is more likely to hike, MBS tend to lose some ground.
Friday was made all the more "spooky" by the fact that much of the drama was transpiring in the afternoon on a summertime Friday. That may not sound too spooky, but for investors who are used to having lots of other investors to trade/buy/sell with, the comparative ghost town of a summertime Friday afternoon can result in markets getting a bit carried away. Much like a scientific study: a smaller sample size can make for some less reliable results.
Now that we're back to the comparatively bigger sample of market participants today, we're seeing MBS and other parts of the bond market return to their pre-Fed levels. It will take some lenders a bit more time to get rate sheets back in line with Thursday's latest levels, but many are already there. Where we go from here may well be dictated by the economic reports coming out during the remainder of the week. In that regard, Friday has the biggest potential for drama, thanks to the important Employment Situation Report.
Loan Originator Perspectives
It’s Monday after Jackson Hole and we survived. Pretty tame actually. Being the last week of Summer I’d expect things to be quiet but we do have to contend with the NFP report on Friday. Stay tuned as with a lot of traders most likely on vacation this week there may, or may not, be some swings with possible liquidity issues and a few traders moving the pile. But we’re still in the current 1.5-1.6 range so rates are great if closing within the next 30 days. -Jeff Anderson, Loan Officer, Salem Five Mortgage, LLC
All the late day loses from Friday have now been recouped but my pricing is still down from Friday. If you floated over the weekend, I would continue to float and evaluate pricing in the morning. This will give lenders the time needed to pass along the gains. -Victor Burek, Churchill Mortgage
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).