Mortgage Rates Are Anything But 'Unchanged'

Mortgage Rates didn't move much today compared to yesterday's latest levels, but that's the only way to view them as being 'unchanged.'  Even so, as is typical for any Thursday, news media is awash in the mortgage rate headlines resulting from standard-issue repackaging of Freddie Mac's weekly rate report (Freddie puts out the numbers and hundreds of journalists write a story based on those numbers).  At the end of the day, it's only one piece of data that has been redistributed numerous times.

Normally that's not a problem.  If the headlines reflect reality, then it doesn't much matter if hundreds of stories are written about it.  But occasionally the underlying data lags reality due to Freddie's methodology.  That quickly becomes a problem on days like today when rates are, in fact, at their highest levels in more than 3 months, and SIGNIFICANTLY higher than they were a week ago today.  In fact, there are few other weeks in recent memory that have seen rates move higher at a quicker pace.  The average lender is quoting rates that are at least an eighth of a point higher today compared to last Thursday.

Tomorrow brings the important Employment Situation (aka "the jobs report"), which is the most closely-watched labor market metric on any given month.  The jobs report always carries the risk of significant market movement. Between that and the generally elevated rates, it doesn't make much sense to float in this environment.  That will continue to be the case until we see either a big push back toward lower rates, or an extended period (5-10 days at least) of stability at current levels.

Loan Originator Perspective

Tomorrow's almighty jobs report may be the data point that helps rates fall back into the "comfort zone" range, or perhaps the straw that breaks the camel's back, so to speak.  Either way, floating is riskier than normal at the moment, especially if you're hoping to close within 2-3 weeks.  We are in the midst of an uptrend in rates.  It can get much worse before it gets better.  Defense is the only play here.  Loans closing inside of 45 days should consider locking, even though we may bounce from this technical point tomorrow.  -Gus Floropoulos, VP, The Federal Savings Bank

Slip, Slidin' Away may have been a catchy Simon and Garfunkel tune in 1977, but when applied to bonds' recent performance, it's not nearly as appealing.  Both treasuries and MBS lost further ground today as weekly unemployment claims fell dramatically.  There's far more signs of domestic economic growth than distress at the moment, and that's not good for rates.  Floating into tomorrow's NFP jobs report is always risky, can't advise it now, given the recent trend to higher rates.  -Ted Rood, Senior Originator

Today's Best-Execution Rates

• 30YR FIXED - 3.5-3.625%
• FHA/VA - 3.25%
• 15 YEAR FIXED - 2.75-2.875%
  
• 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).