Mortgage Rate Trend is Not Your Friend

By: Matthew Graham •

Mortgage Rates were higher again today, marking the 9th straight day without any improvement.  3.625% is quickly becoming the most prevalent conventional 30yr fixed quotes  on top tier scenarios, though quite a few lenders remain at 3.5%.  On an optimistic note, when losing streaks get this long in rates markets, we're increasingly likely to see at least one day of relief in the near term future.  That said, it will take more than a day or two of strength to call the current trend into question.

If it's not clear from the title, the tone, and the originator perspective below, the current trend is not your friend--at least not if you want rates to go lower in the short term.  However, the trend can still serve a purpose.  Because of its linearity and duration, it will be fairly easy to see when this trend is breaking, and that will be a better time to entertain riskier lock/float strategies.  Between now and then, it's far safer to assume the trend will continue.

 See Rates from Lenders in Your Area

Loan Originator Perspective

With a series of "higher highs" and "higher lows" in bond yields, markets are pointing to higher rates.  That trend is not your friend, but it needs to be respected.  I am looking to lock all loans within a 30 day window, with some flexibility for loans 30-45 days out, based on the concept that we MAYBE bounce back.  I think we are all optimistic this will reverse course, but optimism is not a strategy.  Defense wins championships.    -Gus Floropoulos, VP, The Federal Savings Bank

Bonds' losing streak continued today, as rates rose slightly, again.  I said last week the short term trend was not our friend, and that's still the case.  Floating now is akin to a desperate poker player drawing to an inside straight.  It might turn out well, but playing against the odds typically doesn't.  Until this pattern breaks, I'm locking early.  -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).