Mortgage Rates Fall Back Into Range

Mortgage Rates were in a bit of a pickle on Friday afternoon.  The big jobs report had just come out slightly weaker than expected, yet rates didn't improve as they normally would, following such data.  In fact, underlying bond markets were pointing toward HIGHER rates by the end of the day.  We were left to wonder if this was the first step in a move up and out of the recent sideways range.

We might still be wondering about the next move had it not been for this morning's ISM Services data (another major economic report that tends to move financial markets, including rates, when it deviates from forecasts in a big way).  The data was much weaker than expected, prompting investors to seek the relative safety of the bond market.  When demand for bonds rises, rates fall.  That was indeed the case today, albeit on a small scale.  A fair amount of lenders kept their rate sheets the same all day, but at least half sent out slightly improved rate sheets after markets responded to the ISM data.

In the bigger picture, the movement was barely detectable, but for many lenders, it was enough to bring rates squarely back into the range that's dominated the past several weeks.  

Loan Originator Perspectives

Right back in the bottom of the range.  It almost feels like its a joke, fixed, rates are staying here forever.....but we know they're not.  With that said, I favor floating  longer term loans (+21 calendar days to close), shorter term files should be locked.  -Gus Floropoulos, VP, The Federal Savings Bank

After a sedate start, bond markets rallied today when ISM Non-Manufacturing data missed expectations badly, indicating US economic growth may be slowing.  As of mid afternoon, 14 lenders issued improved rate sheets, with more likely to follow.  We're still in "the range", but at least nearer the mid-point than the top.  Outside of Thursday's policy announcement from the ECB, the rest of the week doesn't have much meaningful data.  My hunch is we remain near current pricing, which is quite attractive.  Floating may bring marginal gains, locking always brings certainty, particularly if you have a September closing.  -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).