Mortgage Rates Lower as Market Digests Fed

Mortgage Rates made more substantial gains today, after financial markets had more time to react to yesterday's announcement from the Federal Reserve.  Although the Fed held its policy rate steady, the bigger story was a sharp downgrade in the longer term rate outlook.  In short, the Fed sees interest rates remaining "lower for longer."  They increasingly confirm this stance with their updated forecasts.  

Although mortgage rates don't directly follow the Fed Funds rate, they are sensitive to changes in the expected path of the Fed's rate.  With the Fed downgrading its rate hike expectations, mortgage rates have fallen.  We likely would have seen more of a move yesterday, but with the Fed announcement happening in the afternoon, it doesn't leave as much time for lenders to react.  Today's gains are partly due to those lenders getting "caught up," but there has been further improvement in financial markets as well.  

Some of the more aggressive lenders are getting back to quoting 3.375% on top tier conventional 30yr fixed scenarios.

Loan Originator Perspective

Markets have digested yesterday's Fed Statement and press conference, and breathed sighs of relief as there were no references to looming inflation or booming economies.  Pricing improved yesterday PM, and has done so again today, although the moves are not huge.  One scenario I've been watching improved 25 bps in pricing since Tuesday AM, which beats losing 25 bps.  I'll float new applications for the moment, think we've got a little room for further improvement. -Ted Rood, Senior Originator

Today's Best-Execution Rates

• 30YR FIXED - 3.375- 3.5%
• FHA/VA - 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).